Rating action

Scope Ratings GmbH (Scope) has performed the following rating action:

Lessee Payment Contingent Fixed Rate Notes, EUR 21.9m outstanding: upgraded to BBB_SF from BBB-_SF

Scope’s review was based on available reporting reflecting performance up to September 2024.

Transaction overview

The transaction is a cash securitisation of bicycle leases with residual value exposure, originated by Lesora GmbH (previously Hofmann Leasing GmbH) issued in November 2023. A detailed description of the transaction features and analytical assumptions, at closing, can be found in the transaction´s rating report, available at Scope´s website.

As of the portfolio reporting cut-off date (September 2024), the underlying portfolio of assets had an expected remaining weighted average life (assuming zero defaults and prepayments) of approximately 1.3 years, and the pool factor was 72.7%. Credit enhancement on the notes stands at 9%.

Rating rationale

The review addressed a) the observed performance of the collateral as of the review cut-off date, b) Scope´s forward-looking performance assumptions, in the context of the expected macro-economic environment over the remaining life of the transaction, c) the transaction´s updated asset and liability structure, and d) the issuer´s exposure to key transaction parties.

Beyond the key rating drivers addressed further below, the main analytical considerations addressed during this periodic review are:

Good collateral performance¹. As of September 2024, no lease receivables were reported as defaulted and only 0.18% of the outstanding portfolio is more than 60 days past due. We have adjusted Scope’s mean assumption from 1.83% at closing to 1.41%.

Granular portfolio¹. Since the ramp-up period has ended and the portfolio is now highly granular, the remaining lifetime default rates are approximated through an inverse gaussian distribution.

Key rating drivers

The key rating drivers remain aligned with those disclosed on our rating action release dated 21 November 2023.

Rating-change drivers

All else equal, the following factor may constitute an upside rating driver:

• A positive deviation of observed transaction performance from Scope´s forward looking performance assumptions.

All else equal, the following factors may constitute downside rating drivers:

• Increase of key counterparty risk with potential impact on the transaction’s performance.
   
• A material deterioration of the transaction performance.

Quantitative analysis and assumptions

Scope used a proprietary cash flow model to calculate the expected loss and expected weighted average life of the fixed rate notes, considering the transaction´s assets and liability structure. Asset cash flows are projected based on the securitised portfolio amortisation schedule and on committee-agreed upon performance assumptions, which reflect the characteristics and quality of the portfolio. The model replicates the transaction’s key structural features, including the capital structure, the order of priority of the issuer´s liabilities, and enhancement features such as excess spread and cash reserves.

The key analytical assumptions include the following: an inverse-gaussian distribution of portfolio remaining lifetime defaults, with a mean of 1.41% and a coefficient of variation of 137%; rating-conditional recovery rates ranging from 50% under a B scenario to 30% under a AAA scenario; high and low constant prepayment rate scenarios of 5% and 0%, respectively; and stressed senior fees of 0.5%.

Sensitivity analysis

Scope tested the resilience of the credit rating against deviations in the main input parameters: the portfolio credit quality 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.

• A 50% increase in the mean default rate assumption has a minus one notch quantitative impact on the notes.
   
• A 50% decrease in Scope´s rating-conditional recovery rate assumptions has a minus one notch quantitative impact on the notes.

Rating driver references
1. Transaction reporting (Confidential)

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 Model Version 2.0, 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 this Credit Rating, (Consumer and Auto ABS Methodology, 4 March 2024; General Structured Finance Rating Methodology, 6 March 2024; Counterparty Risk Methodology, 10 July 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for this Credit Rating is (Cash Flow Model Version 2.0), 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 Rating: 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 the Credit Rating 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 not received a third-party asset due diligence assessment/asset audit at closing. Scope Ratings has performed its own analysis of the data quality, based on information received from the Rated Entity or Related Third Parties, which is not and should be not deemed equivalent to the performance of due diligence or an audit. The internal analysis was considered when preparing the Credit Rating and it has no impact on the Credit Rating.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Rating and the principal grounds on which the Credit Rating are based. Following that review, the Credit Rating was not amended before being issued.

Regulatory disclosures
The Credit Rating is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating is UK-endorsed.
Lead analyst: Leonardo Scavo, Associate Director
Person responsible for approval of the Credit Rating: Antonio Casado, Managing Director
The final Credit Rating was first released by Scope Ratings on 21 November 2023.

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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis 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.