The rating actions are as follows:

Schuldschein Loan (no ISIN), EUR 250m: assigned new rating AAA_SF
Class A Floating Rate Notes (ISIN XS1492396939), EUR 150m: assigned new rating AAA_SF

The transaction is a cash flow securitisation of a four-year revolving portfolio made of leasing receivables, worth EUR 437.9m on the closing date. The assets consist of leases primarily granted to Austrian small- and medium-sized enterprises and private individuals, to finance new and used vehicles. The transaction's final maturity is on 15 January 2031.

Rating rationale

The ratings reflect the legal and financial structure of the transaction; the quality of the underlying receivables given macroeconomic conditions in Austria; the ability of Raiffeisen-Leasing Österreich GmbH, UNIQA Leasing GmbH and Raiffeisen-Leasing Fuhrparkmanagement GmbH as the originators and servicers, and Raiffeisen Zentralbank Österreich AG as the back-up servicer; the counterparty credit risk exposure to The Bank of New York Mellon, Frankfurt Branch as the account bank and The Bank of New York Mellon, London Branch as paying agent; and the corporate and trustee services of Elian Fiduciary Services Luxembourg Sarl and SFM Trustees Limited, respectively.

The ratings are driven by Austria’s favourable macroeconomic framework with low domestic economic risk, which will benefit the performance of the assets.

The ratings are supported by substantial credit enhancement available to the rated tranches. The class A notes and the Schuldschein Loan (together the ‘senior notes’) are protected against potential portfolio losses by the 9.45% of credit enhancement from overcollateralisation, further supported by excess spread. The senior notes benefit from strictly sequential amortisation in combination with a fast-amortising portfolio after a revolving period of four years. Excess spread is available to provision for defaulted assets during the revolving period and an accelerated amortisation of the notes thereafter. Excess spread amounts to 1.16% p.a., assuming a 3-month Euribor of 0% and after accounting for senior costs of 1.1%.

Residual value risk in the transaction is immaterial because the issuer benefits from a direct recourse to the lessees, which are liable for any payment shortfall.

The ratings take into account the higher risk from the revolving nature of the portfolio. Scope modelled a static portfolio, which incorporates expected portfolio quality migration by the end of the replenishment period.

The servicers benefit from 45 years of experience in the Austrian leasing market and apply the same well-established procedures and risk-analysis principles, which ensure the high consistency of originated contracts over the revolving period.

Scope has modelled a point-in-time lifetime default rate of 4.2% for the portfolio, a volatility of default in line with a coefficient of variation of 56.3%, and a recovery rate assumption of 41.6% including the stress applicable to a AAA rating.

The data provided by the originator suggests that the point-in-time performance for the Austrian auto lease asset class is aligned with a long-term performance that exhibits a low volatility.

Key rating drivers

Solid track record of the originator (positive). Raiffeisen-Leasing Austria has been active in the leasing market for 45 years. Its business benefits from seasoned processes, experienced staff and a very granular marketing network. The same procedures and risk-analysis principles are applied to all origination channels of the transaction.

Stable economy (positive). The transaction benefits from the stable Austrian economy. Scope expects the repayment ability of Austrian consumers to remain stable, based on the flat unemployment rates, stable interest rates and improvement in GDP growth.

Excess spread (positive). The structure traps excess spread available from the asset portfolio to cure undercollateralisation arising from periodic losses during the revolving period. Further, the structure traps excess spread, which allows notes to be redeemed faster after the replenishment period.

Liquidity coverage (positive). The structure provides strong liquidity protection via a combined priority of payments, which ensures the timely payment of interest on senior notes. It also has an amortising cash reserve, which is 0.8% of the aggregate outstanding balance of senior notes and class B notes. The cash reserve cannot be used to provision defaults.

Recoveries (positive). The issuer has full economic ownership of the purchased receivables and beneficial ownership of the financed objects. The issuer is entitled to liquidation proceeds from leased objects according to the transaction documents.

Revolving portfolio (negative). The portfolio will be replenished over a period of four years after the closing date. The portfolio’s characteristics and credit quality could migrate during this period, though this is mitigated by asset eligibility criteria and amortisation triggers.

Unhedged interest risk (negative). The structure is unhedged against interest rate mismatch between assets and liabilities. This is mitigated by the natural hedge resulting from the floating nature of the assets and liabilities, both referenced to 3-month Euribor rates. Additionally the structure benefits from a floor of 0% on the assets’ 3-month Euribor.

No servicer replacement triggers (negative). The three servicers are unrated entities, and the structure has no triggers for their replacement. This is mitigated by the fact that assets are originated and serviced by three different entities, lowering the impact of single servicer defaults. Servicing risk is mitigated by the appointment of Raiffeisen Zentralbank Österreich AG, a part of the Raiffeisen group, as the backup servicer.

Rating-change drivers

Changes to the strategic positioning of the originators which increase the risk of the portfolio could result in downgrades.

Worse-than-expected performance of the assets could negatively impact the ratings.

Rating sensitivity

Scope tested the resilience of the rating against deviations of main input parameters: mean default rate and recovery rate. This analysis has the sole purpose of illustrating the sensitivity of the rating to input assumptions and is not indicative of expected or likely scenarios.

The senior notes’ rating declines to AA- if the mean default-rate assumption is increased by 50%; the rating declines to AA if the base case recovery-rate assumption is decreased by 50%.

Methodology

The methodology applicable for the ratings is 'Auto ABS Rating Methodology' dated June 2016, 'General Structured Finance Rating Methodology', dated August 2016 and the 'Methodology for Counterparty Risk in Structured Finance', dated August 2016. All files are available on www.scoperatings.com.

Scope analysts are available to discuss all the details of the rating analysis and the risks, to which this transaction is exposed.

Regulatory and legal disclosures

Important information
Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
The party responsible for the dissemination of the financial analysis is Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB 161306 B, Executive Board: Torsten Hinrichs (CEO), Dr. Stefan Bund, Dr. Sven Janssen.
The rating analysis has been prepared by Martin Hartmann, Lead Analyst. Guillaume Jolivet, Committee Chair, is the analyst responsible for approving the rating.

Rating history
The rating concerns newly-issued financial instruments, which were evaluated for the first time by Scope Ratings AG.

Information on interests and conflicts of interest
The rating was prepared independently by Scope Ratings but for a fee based on a mandate of the issuer of the investment, represented by the management company.
As at the time of the analysis, neither Scope Ratings AG nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings AG or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, nor any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating.

Key sources of information for the rating
Offering circular and transaction-related contracts; management due diligence presentation; historical gross loss and recovery vintage data; loan-by-loan portfolio information, portfolio audit report, and legal opinions.
Scope Ratings considers the quality of the available information on the evaluated entity to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently.

Examination of the rating by the rated entity prior to publication
Prior to publication, the rated entity was given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full working day, to point out any factual errors, or to appeal the rating decision and deliver additional material information. Following that examination, the rating was not modified.

Methodology
The methodology applicable for the ratings is 'Auto ABS Rating Methodology' dated June 2016, 'General Structured Finance Rating Methodology', dated August 2016 and the 'Methodology for Counterparty Risk in Structured Finance', dated August 2016 . All files are available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency’s website.

Conditions of use / exclusion of liability
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