Morningstar DBRS Assigns Credit Ratings to abc SME Lease Germany S.A., acting in respect of its Compartment 10

DBRS Ratings GmbH (Morningstar DBRS) assigned credit ratings to the following classes of notes (the Rated Notes) issued by abc SME Lease Germany S.A., acting in respect of its Compartment 10 (the Issuer):

-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at A (low) (sf)
-- Class C Notes at BB (high) (sf)
-- Class D Notes at BB (low) (sf)

The credit ratings on the Class A1 and Class A2 Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. The credit ratings on the Class B, Class C, and Class D Notes address the ultimate payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. Morningstar DBRS did not assign a credit rating to the Class E Notes (together with the Rated Notes, the Notes) also issued in this transaction.

The transaction is a securitisation of a portfolio of commercial leases and consists of the issuance of notes backed by receivables arising from fixed-rate leasing contracts granted by abcfinance GmbH, Hako Finance GmbH, and Schneidereit Finance GmbH (together, the Originators) to small businesses and professional clients residing in Germany.

As of the initial valuation date of 31 May 2025, the initial portfolio consisted of 17,332 lease contracts extended to 12,791 borrowers, with an aggregate discounted principal balance of EUR 449.9 million. The portfolio consisted of 46.0% vehicles lease receivables; 28.6% facilities lease receivables; 19.7% machines lease receivables; and 5.7% solariums, leisure facilities, and fitness lease receivables. The portfolio is static and the residual value is not transferred to the Issuer.

The initial portfolio exhibits good industry diversification, with the top three sector exposures per Morningstar DBRS' industry classifications being Business Services, Homebuilding & Construction, and Healthcare Providers & Services and representing 23.6%, 7.3%, and 6.6% of the portfolio, respectively. The portfolio also shows a low borrower-group concentration as the largest, top five, and top 10 lessee exposures account for 0.6%, 2.0%, and 3.2% of the portfolio, respectively.

The Originators service the lease portfolio while abcbank GmbH (abcbank) acts as the seller and master servicer for this transaction. akf bank GmbH & Co KG has been appointed as backup servicer.

CREDIT RATING RATIONALE
The credit ratings are based on the following analytical considerations:
-- The transaction's structure, including the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the Issuer's financial obligations according to the terms under which the Rated Notes are issued;
-- The credit quality and the diversification of the collateral portfolio, its historical performance, and the projected performance under various stress scenarios;
-- abcbank's, the Originators', and the sub-servicers' capabilities with respect to originations, underwriting, servicing, and financial strength;
-- The operational risk review of abcbank, which is deemed to be an acceptable master servicer;
-- The transaction parties' financial strength with regard to their respective roles;
-- Morningstar DBRS' sovereign credit rating on the Federal Republic of Germany, currently at AAA with a Stable trend; and
-- The consistency of the transaction's structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

TRANSACTION STRUCTURE
Morningstar DBRS maintains a public long-term issuer credit rating at AAA on the European Investment Fund (EIF or the Class A1 Guarantor). The EIF issued an unconditional and irrevocable guarantee on first demand on the due and punctual timely payment of interest amounts and ultimate principal amounts due under the Class A1 Notes to the security trustee and for the benefit of the Class A1 Noteholders. However, the performance of the securitised portfolio and the structural features of the transaction are, in themselves, sufficient to support the assigned credit rating on the Class A1 Notes, irrespective of the contribution of the guarantee.

The Rated Notes benefit from credit enhancement provided by the overcollateralisation of the portfolio and excluding the liquidity reserve. The amortising liquidity reserve will be available to cover expenses, senior fees, the Class A1 guarantee fee, and interest on the Class A1 and Class A2 Notes. The liquidity reserve will be maintained at 1.1% of the performing portfolio, subject to a floor of EUR 2.25 million.

The transaction allocates collections through separate interest and principal priority of payments. The Rated Notes will be redeemed pro rata in the principal waterfalls based on the relative tranche thickness at closing (i.e., 45.0%, 36.9%, 8.1%, 4.5%, and 5.6% for the Class A1, Class A2, Class B, Class C, and Class D Notes, respectively) until a sequential redemption event occurs, after which the nonreversible, fully sequential redemption of the Rated Notes will start.

The Rated Notes pay interest indexed to one-month Euribor plus a margin and the interest rate risk arising from the mismatch between the floating-rate notes and the fixed-rate collateral is reduced through an interest rate swap with an eligible counterparty.

TRANSACTION COUNTERPARTIES
The Bank of New York Mellon - Frankfurt Branch (BNY Frankfurt) is the account bank for the transaction. Morningstar DBRS has a private credit rating on the entity and considers BNY Frankfurt to meet the relevant criteria to act in its capacity. The transaction documents contain downgrade provisions relating to the account bank consistent with Morningstar DBRS' criteria.

ING Bank N.V. (ING Bank) is the swap counterparty for the transaction. Morningstar DBRS' public credit rating on ING Bank meets the criteria to act in such capacity. The transaction documents contain downgrade provisions consistent with Morningstar DBRS' criteria.

PORTFOLIO ASSUMPTIONS
The credit ratings are also based on the following analytical considerations:
-- Morningstar DBRS used historical dynamic arrears data to determine a conservative annualised probability of default (PD). Morningstar DBRS assumed an annualised PD of 1.8% for vehicles leases; 2.4% for facilities leases; 2.0% for machines leases; and 2.3% for solariums, leisure facilities, and fitness leases. The weighted-average annualised PD of the portfolio is 2.1%.
-- The assumed weighted-average life (WAL) of the portfolio is 2.1 years.
-- Morningstar DBRS used the PDs and WAL in its SME Diversity Model to generate the hurdle rates for the relevant credit ratings.

Morningstar DBRS' credit ratings on the Rated Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the Rated Notes are the related interest amounts and the principal amount.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

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 factors 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 at https://dbrs.morningstar.com/research/454196.

Morningstar DBRS 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: Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583.

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.

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 performance data relating to the receivables provided by the Originators and the seller directly or through the arranger, UniCredit Bank GmbH.

Morningstar DBRS received the following data information, split by facilities, machines, leisure, vehicles lease sub-pool:
-- Quarterly static default data from Q1 2012 to Q3 2024,
-- Quarterly static recovery data (total and asset sale) from Q1 2012 to Q3 2024,
-- Monthly dynamic delinquency data from January 2012 to September 2024, and
-- Monthly dynamic prepayment data from December 2018 to September 2024.

In addition, Morningstar DBRS received lease-level characteristics, stratification data, and contractual amortisation profile as at 31 May 2025.

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

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.

These credit ratings concern newly issued financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

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 ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- PD Rate Used: Base case annualised PD of 1.8% for vehicles leases; 2.4% for facilities leases; 2.0% for machines leases; and 2.3% for solariums, leisure facilities, and fitness leases. Default rate of 28.2% in the AAA (sf) scenario, 17.1% in the A (low) (sf) scenario, 9.5% in the BB (high) (sf) scenario, and 8.4% in the BB (low) (sf) scenario, with a 25% and 50% increase on the applicable base case PD.
-- Recovery Rate Used: Base case recovery rate of 51.4%.
-- Loss Given Default (LGD) Used: Base case LGD of 48.6%. LGD of 64.3% in the AAA (sf) scenario, 58.3% in the A (low) (sf) scenario, 53.4% in the BB (high) (sf) scenario, and 50.8% in the BB (low) (sf) scenario.

Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected default and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected default and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected default and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected default and 50% increase in the expected LGD.

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios are:
-- Class A1 and Class A2 Notes: AA (high) (sf), A (high) (sf), AA (sf), A (high) (sf), A (low) (sf), A (low) (sf), BBB (high) (sf), and BBB (low) (sf).
-- Class B Notes: BBB (high) (sf), BBB (low) (sf), BBB (low) (sf), BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf), and B (high) (sf).
-- Class C Notes: BB (high) (sf), BB (sf), BB (sf), B (high) (sf), B (low) (sf), B (high) (sf), B (low) (sf), and below B (low) (sf).
-- Class D Notes: B (sf), B (low) (sf), B (low) (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf), and below B (low) (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: Ilaria Maschietto, Vice President
Rating Committee Paolo Conti, Associate Managing Director
Initial Rating Date: 18 June 2025

DBRS Ratings GmbH
Neue Mainzer Straße 75
D-60311 Frankfurt am Main
Tel. +49 (69) 8088 3500
Geschäftsführung: Detlef Scholz, Marta Zurita Bermejo
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Rating European Consumer and Commercial Asset Backed Securitisations (18 September 2024)
https://dbrs.morningstar.com/research/439583
-- Rating CLOs Backed by Loans to European SMEs (5 June 2025) and Morningstar DBRS SME Diversity Model 2.7.1.6
https://dbrs.morningstar.com/research/455697
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024)
https://dbrs.morningstar.com/research/443196
-- Rating European Structured Finance Transactions Methodology (17 June 2025)
https://dbrs.morningstar.com/research/456339
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024)
https://dbrs.morningstar.com/research/439913
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024)
https://dbrs.morningstar.com/research/439571
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025)
https://dbrs.morningstar.com/research/454196

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.