Rating action

Schuldschein Loan (no ISIN), EUR 250.0m: Affirmed at AAA_SF

Class A (XS1492396939), EUR 150.0m: Affirmed at AAA_SF

Class B (XS1492397820), EUR 37.8m: Not rated

Sub-loan (no ISIN), EUR 3.6m: Not rated

The rating actions incorporate information available from transaction reporting¹ through the January 2020 payment date.

Transaction overview

ROOF Leasing Austria S.A., Compartment 2016 is a cash flow securitisation of a four-year revolving portfolio 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. Residual-value risk is limited because the issuer benefits from direct recourse to the lessees, which are liable for any payment shortfall. The transaction closed 30 September 2016.

The rated instruments benefit from strictly sequential amortisation, which reflects the portfolio’s amortisation following the conclusion of the revolving period. Excess spread is available to provision for defaulted assets during the revolving period and can accelerate amortisation of the rated instruments thereafter. A cash reserve is available to cover potential shortfalls to senior fees and interest.

Rating rationale

The rating actions are largely driven by the steady performance of the portfolio during the four-year revolving period, 9.45% credit enhancement for the rated instruments, excess spread of 1.51% and a fully funded reserve. No early-amortisation triggers have been breached to date and the issuer has not had trouble sourcing quality collateral, as evidenced by the closing portfolio having been fully replenished.

Delinquencies, defined as 30 days past due, are 0.19% of the outstanding portfolio balance, with a three-month rolling average of 0.11%. Cumulative net losses are 0.69% of the portfolio balance as of closing, which is well below the current 2.50% early amortisation limit. Excess spread has been well above the required 1.05% threshold since closing.

The transaction continues to be supported by the credit quality of Raiffeisen Bank International AG and its three subsidiaries acting as servicers in the transaction, Raiffeisen Leasing Österreich GmbH, Uniqa Leasing GmbH and Raiffeisen-Leasing Fuhrparkmanagement GmbH; as well as The Bank of New York Mellon as account bank and paying agent. We assessed the counterparties’ credit quality using public information.

Key rating drivers

Asset performance (positive). 30+ day delinquencies account for 0.19% of the outstanding portfolio as of reporting though January 2020. Cumulative defaults as a percentage of the portfolio at closing is 0.69%. Quality collateral has replaced paid-down assets, as no early-amortisation triggers have been breached.

Excess spread (positive). Excess spread is currently 1.51%, which can be used to wash potential losses during the revolving period and can accelerate amortisation of the rated instruments after the revolving period concludes.

Revolving portfolio (negative). The portfolio is exposed to negative migration over the remainder of revolving period. However, tight early-amortisation triggers mitigates severe portfolio credit deterioration.

No servicer-replacement triggers (negative). The three servicers are unrated entities, and the structure has no triggers for their replacement. This is partially offset by the servicer diversity, lowering the impact of single-servicer defaults.

Rating-change drivers

Negative: Worse than expected asset performance may negatively impact the ratings.

Quantitative analysis and assumptions

Scope Ratings has performed a cash flow analysis, considering the portfolio's characteristics and the transaction's main structural features, such as the notes’ priorities of payments, note size, the coupon on the notes, senior costs, as well as servicing fees. This analysis produces an expected loss and expected weighted average life for the notes.

Scope applied its large homogenous portfolio approximation approach when analysing the collateral pool and projecting cash flows over the expected amortisation period. The cash flow analysis considers the probability distribution of the portfolio’s default rate using an inverse Gaussian distribution.

At closing, Scope modelled the transaction to the its allowable limits to capture negative portfolio migration during the revolving period. As such, Scope has maintained its assumptions from closing. Scope considered a portfolio mean default rate of 4.2% and coefficient of variation of 56.9%, with a AAA rating-conditional recovery rate of 41.7%.

Scope analysed the transaction under high (12%) and low (0%) prepayment scenarios.

Sensitivity analysis

Scope tested the resilience of the rating against deviations in the main input parameters: the portfolio mean-default-rate and the portfolio 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 following shows how the results for each rated instrument change compared to the assigned rating when the portfolio’s expected mean default rate increases by 50%, or the portfolio’s expected recovery rate decreases by 50%, respectively:

• Schuldschein Loan: sensitivity to default rate assumptions, 2 notches; sensitivity to recovery rates, 2 notches;
• Class A: sensitivity to default rate assumptions, 2 notches; sensitivity to recovery rates, 2 notches.

Rating driver references
1 Investor reports: The Bank of New York Mellon (private)

Stress testing
Stress testing was performed by applying rating-adjusted recovery rate assumptions.

Cash flow analysis
Scope performed a cash flow analysis of the transaction with the use of Scope Cash Flow SF EL Model Version 1.1 incorporating default and recovery rate assumptions over the portfolio’s amortisation period, taking into account the transaction’s main structural features, such as the notes’ priorities of payment, the notes’ size and coupons. The outcome of the analysis is an expected loss and an expected weighted average life for the notes.

Methodology
The methodologies used for these ratings are ‘Consumer and Auto ABS Rating Methodology’ dated 4 March 2020 and the ‘Methodology for Counterparty Risk in Structured Finance’ dated 24 July 2019, which are available on www.scoperatings.com.
The model used for this rating(s) and/or rating outlook(s) is available in Scope’s list of models, published under: https://www.scoperatings.com/#!methodology/list.
Information on the meaning of each rating category, including definitions of default and recoveries can be viewed in the “Rating Definitions - Credit Ratings and Ancillary Services” published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA. Please also refer to 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 definitions of default and rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how Environmental, Social or Governance factors (ESG factor) are incorporated into the rating can be found in the respective sections of the methodologies or guidance documents provided on www.Scoperatings.com/methodologies/ ESG factors in ratings.

Solicitation, key sources and quality of information
The rated instruments’ issuer and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: issuer, public domain, the rated entities’ agents, third parties and Scope internal sources.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Scope Ratings GmbH received a third-party asset audit at closing. The external asset audit was considered when preparing the rating and it had no impact on the credit rating.
Prior to the issuance of the rating actions, the rated entity was given the opportunity to review the ratings and the principal grounds on which the credit ratings are based. Following that review, the ratings were not amended before being issued.

Regulatory disclosures
These credit ratings are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thomas Miller-Jones, Associate Director
Person responsible for approval of the rating: David Bergman, Managing Director
The final ratings were first released by Scope on 30 September 2016.

Potential conflicts
Please see www.scoperatings.com. for a list of potential conflicts of interest related to the issuance of credit ratings.

Conditions of use / exclusion of liability
© 2020 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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