Rating action

Scope Ratings GmbH (Scope) has assigned final ratings to notes issued by ROOF AT S.A., Compartment 2024 as follows:

Class A notes (ISIN: XS2798080458), EUR 125,000,000: rated AAA_SF

Class A loan notes, EUR 350,000,000: rated AAA_SF

Scope did not assign ratings to the Class B notes (ISIN: XS2798080706), which account for EUR 54,400,000.

Transaction overview

The transaction is a cash flow securitisation of leasing receivables originated by four entities who are part of Raiffeisen Leasing Group (Raiffeisen), with an initial three-year replenishment period, subject to collateral performance triggers and asset-eligibility covenants. The assets finance new and used vehicles lease contracts, primarily for small and medium-sized enterprises (SMEs) and private individuals in Austria. The capital structure features the rated class A notes and class A loan notes (both referred to as class A instruments), the strictly subordinated class B notes and the subordinated loan. Proceeds from the class A instruments and class B notes were used to purchase the receivables at discounted value. The subordinated loan was used to fund: i) the liquidity reserve of EUR 12.4m; and ii) the purchase reserve of EUR 7.4m. The four originators granted the subordinated loan and collectively retained the class B notes.

Rating rationale

The ratings reflect: i) the legal and financial structure of the transaction; ii) the quality of the underlying collateral in the context of the Austrian macroeconomic environment; iii) the ability of the originators and servicers, all part of Raiffeisen; and iv) the counterparty credit risk exposure to the four servicers, to Bank of New York Mellon, Frankfurt Branch (BNYM) as the issuer account bank and to Credit Agricole Corporate and Investment Bank (CACIB) as the interest rate swap provider.

Class A instruments benefit at closing date from 14.0% credit enhancement in the form of overcollateralisation and two cash reserves, and also from 0.3% minimum excess spread. The strictly sequential debt principal amortisation in combination with a fast-amortising portfolio after a revolving period scheduled to last initially three years, reflects positively on the rated class A instruments. Excess spread is available to provision for defaults during the revolving period and accelerates the amortisation of the notes thereafter.

The ratings account for the credit quality of the underlying portfolio and the risk of adverse portfolio migration during the revolving period. Scope has incorporated the credit performance and servicing track record of the originators with respect to leasing receivables and considered the stability of the Austrian macroeconomic stability.

The ratings reflect the transaction's counterparty risk exposure to the servicers, the issuer account bank holder, and the swap counterparty. Scope has assessed the credit quality of the counterparties through Scope's rating on Raiffeisen Bank International AG and considering public information regarding BNYM and CACIB.

Key rating drivers

Credit enhancement (positive). ¹ The class A instruments benefit from 14.0% credit enhancement provided by the overcollateralisation and the issuer cash reserves (cash reserve and replenishment reserve), plus available excess spread.

Solid track record of the originators (positive).^1,2 Raiffeisen has been active in the leasing market for over 50 years. Its business benefits from seasoned processes, experienced staff and a very granular marketing network. The same procedures and risk-analysis principles are applied by all originators. (ESG factor)

Turbo amortization (positive).¹ After the replenishment period, excess spread will be used for debt principal repayment, which allows the rated class A instruments to redeem faster. During the revolving period, the structure uses excess spread available from the asset portfolio to provision for defaulted leases.

Simple and transparent structure (positive).¹ The transaction features an up to three-year initial revolving period, subject to portfolio and performance related early amortization triggers and asset eligibility criteria. (ESG factor)

Revolving portfolio (negative).^1,2,3,4 The portfolio will be replenished over three 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 early- amortisation triggers.

Unrated servicers (negative).¹ The four servicers are unrated entities. This is mitigated by the sound credit quality of the servicers' ultimate parents (Raiffeisen Bank International AG and Raiffeisen Landesbanks). Further mitigation comes from Raiffeisen Bank International AG's pre-appointment as back-up servicer.

Fixed-to-floating and basis risk (negative).¹ The debt instruments are linked to 3-month EURIBOR, paying coupon monthly, while most of the asset portfolio is floating rate linked to 3-month EURIBOR with a small share of fixed-rate contracts. This mismatch is mitigated with an interest rate swap and the available excess spread.

One or more key drivers of the credit rating action are considered an ESG factor.

Rating-change drivers

Positives. Improvements in the macroeconomic environment would enhance the support for the rated class A instruments.

Negatives. Worse-than-expected asset performance, reflected in higher-than-expected defaults or lower-than-expected recoveries upon asset default, may negatively impact the ratings.

Quantitative analysis and assumptions

Scope has performed a cash flow analysis considering the collateral portfolio's characteristics and the transaction's main structural features. Scope applied a large homogenous portfolio approximation approach when analysing the collateral pool and projecting cash flows over the expected amortisation period. The cash flow analysis used a probability distribution of the portfolio's default rate, following an inverse Gaussian distribution, to calculate the expected loss of each rated instrument. The analysis also provides the expected weighted average life of each rated instrument. Scope has considered asset and liability amortisation and the evolution in the pool's composition starting from the portfolio dated 30 April 2024.

The analysis considered the higher risk from the revolving nature of the portfolio. Scope modelled an expected portfolio, which incorporates expected portfolio migration by the end of the replenishment period with regards to five different portfolio segments. Scope has modelled a lifetime mean default rate of 2.8% for the portfolio, a volatility of defaults in line with a coefficient of variation of 70.0% and assumed a recovery rate of 40.0% in the AAA rating scenario.

Scope tested the structure for two separate constant prepayment scenarios, 0% and 15%.

Sensitivity analysis

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

The following shows how the quantitative results change when the portfolio's expected mean default rate is increased by 50% and the portfolio's expected recovery rate is reduced by 50%, respectively:

• Class A instruments: sensitivity to default rate, minus two notches; sensitivity to recovery rate, minus one notch.

Rating driver references
1. Transaction and originator documents (Confidential)
2. Historical default and recovery vintage data, delinquent and prepayment data (Confidential)
3. Static data tape and pool stratification tables as of final cut-off date (Confidential)
4. Scope downgrades Austria to AA+ and revises the Outlook to Stable

Stress testing
Stress testing was considered in the quantitative analysis by considering scenarios that stress factors, like defaults and Credit-Rating-adjusted recoveries, contributing to sensitivity of Credit Ratings and consider the likelihood of severe collateral losses or impaired cash flows. The impact on the rated instruments is weighted by the assumptions of the likelihood of the events in such scenarios occurring.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction with the use of Scope Ratings' Cash Flow Structured Finance Expected Loss Model Version 1.2, incorporating relevant asset assumptions, and taking into account the transaction's main structural features, such as the instruments' priority of payments, the instruments' size and coupons. The outcome of the analysis is an expected loss rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodologies used for these Credit Ratings, (Consumer and Auto ABS Rating Methodology, 4 March 2024; General Structured Finance Rating Methodology, 6 March 2024; Counterparty Risk Methodology, 13 July 2023) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings (Cash Flow Structured Finance Expected Loss Model Version 1.2) is available in Scope Ratings' list of models, published under https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in 'Rating Definitions – Credit Ratings, Ancillary and Other Services', published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. 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 Ratings' definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, the Rated Entities' Related Third Parties, third parties and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Scope Ratings has received a third-party asset due diligence assessment/asset audit. The external due diligence assessment/asset audit was considered when preparing the Credit Ratings and it has no impact on the Credit Ratings.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and the principal grounds on which the Credit Ratings are based. Following that review, the Credit 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. The Credit Ratings are UK-endorsed.
Lead analyst: Miguel Barata, Director
Person responsible for approval of the Credit Ratings: Benoit Vasseur, Managing Director
The Credit Ratings were first released by Scope Ratings on 27 May 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability
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