Morningstar DBRS Confirms Credit Rating on Cars Alliance Auto Loans Italy 2015 S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A Notes issued by Cars Alliance Auto Loans Italy 2015 S.r.l. (the Issuer).

The credit rating addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in March 2041.

CREDIT RATING RATIONALE
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- The portfolio performance, in terms of the level of delinquencies and defaults, as of the February 2025 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions for the remaining collateral pool;
-- Absence of revolving termination events; and
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) credit rating level.

The transaction is a securitisation of Italian auto loan receivables originated by RCI Banque S.A., Italian Branch (RCI Italy or the seller). The portfolio as of the January 2025 cut-off date (excluding additional purchased receivables), consisted of loans granted to both private (95.5% of the discounted collateral balance) and corporate (4.5%) clients for the purchase of new (92.4%) and used (7.6%) vehicles. Most of the receivables include a final balloon payment, although, 25.0% of loans have equal monthly instalments.

The transaction was established in July 2015. In March 2021, an amendment to the transaction was executed, including: a renewal of the revolving period for 36 additional months until March 2024; an increase in the portfolio size, partially financed by a new issuance of Class A Notes; an increase in the cash reserve amount; a reduction in the coupon for the Class A Notes to 0.75% from 1.0%; an introduction of an optional redemption by the Class A Noteholders in the event that the excess cash trigger is breached; and some adjustments to the concentration limits. The transaction was further amended in January 2023, when the balloon concentration limits were removed, and the balloon loan instalment ratio definition was updated. In March 2024, another transaction amendment was executed, including: a renewal of the revolving period for 36 additional months until March 2027, an extension of the legal final maturity date until March 2041; and changes to the transaction documents in relation to Zenith Service S.p.A. (Zenith) acting as the reporting agent.

REVOLVING PERIOD & CONCENTRATION LIMITS
The transaction has a revolving period scheduled to end in March 2027, following several extensions since closing. The revolving period will end prematurely if certain performance triggers are breached. To further mitigate the deterioration of the pool, the transaction permits certain concentration limits on the additional portfolios purchased on each payment date. To date, the concentration limits and performance triggers in place have been satisfied. Due to the inclusion of a revolving period in the transaction, Morningstar DBRS' analysis considered potential portfolio migration based on the replenishment criteria set forth in the transaction legal documents.

PORTFOLIO PERFORMANCE
As of the February 2025 payment date, loans that were one to two months and two to three months in arrears represented 0.5% and 0.2% of the outstanding portfolio balance, respectively, while loans more than three months delinquent represented 0.1%. Gross cumulative defaults amounted to 1.2% of the aggregate initial portfolio balance and cumulative transferred receivables, with cumulative recoveries of 62.9% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS updated its base case PD and LGD assumptions to 1.4% and 76.3%, respectively. The portfolio composition continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

Morningstar DBRS adopted high-range core multiples. The inclusion of incremental balloon stresses means that the derived adjusted multiple is above the higher range used at the AAA (sf) credit rating level.

CREDIT ENHANCEMENT AND RESERVES
The portion of the Class J Notes not used to fund the cash reserve provides credit enhancement to the Class A Notes. As of the February 2025 payment date, credit enhancement available to the Class A Notes was 13.0%, stable since the amendment in March 2021.

The transaction benefits from a cash reserve funded through part of the proceeds from the Class J Notes and available to cover senior fees and the interest due on the Class A Notes. The reserve is floored at EUR 1.0 million and has an amortising target equal to 1.0% of the Class A and Class J Notes' aggregate balance. The reserve is currently at its target amount of EUR 21.3 million.

Crédit Agricole Corporate and Investment Bank, Milan Branch (CACIB-Milan) acts as the account bank for the transaction. Based on Morningstar DBRS' private credit rating on CACIB-Milan, the downgrade provisions outlined in the transaction documents, and structural mitigants, Morningstar DBRS considers the risk arising from the exposure to CACIB-Milan to be consistent with the credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings https://dbrs.morningstar.com/research/437781.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the "Master European Structured Finance Surveillance Methodology" (4 February 2025), https://dbrs.morningstar.com/research/447080.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include investor reports provided by Zenith, and loan-level data provided by the European DataWarehouse GmbH.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit ratings, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this issuer took place on 6 March 2024, when Morningstar DBRS confirmed its AAA (sf) credit rating on the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Pascale Kallas.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

-- Morningstar DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 1.4% and 76.3%, respectively.

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (high) (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Pascale Kallas, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 23 July 2015

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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196.
-- Master European Structured Finance Surveillance Methodology (4 February 2025), https://dbrs.morningstar.com/research/447080.
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583.
-- Rating European Structured Finance Transactions Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443199.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.