Moody's Assigns Definitive Ratings to Auto Loan Notes

Strategic Insights -

Moody's Investors Service has assigned definitive ratings to Notes issued by Cars Alliance Auto Loans Germany V 2025-1, a deal backed by a pool of German auto loans originated by RCI Banque. The ratings on the Class A and B notes reflect the credit quality of the portfolio, structural features of the transaction, and its legal integrity. The transaction benefits from a granular portfolio, an experienced originator, and significant excess spread, but features some credit weaknesses such as a high proportion of balloon loans and a 12-month revolving period.

Key Takeaways:

  • The Class A Asset Backed Floating Rate Notes due July 2037 have a definitive rating of Aaa (sf) with a credit enhancement of 7.20% and a reserve fund of 1.25% of the Class A Notes balance at closing.
  • The Class B Asset Backed Floating Rate Notes due July 2037 have a definitive rating of Aa1 (sf) with the same credit enhancement and reserve fund level as the Class A notes.
  • The portfolio of underlying assets consists of 43,376 auto finance contracts with a weighted average seasoning of 10.67 months and a portfolio expected default of 1.4%, expected recovery of 50.0%, and PCE (Portfolio Credit Enhancement) of 8.0%.
  • The transaction benefits from various credit strengths, including a granular portfolio, an experienced originator, and significant excess spread.
  • The high proportion of balloon loans (around 80.0%) and the 12-month revolving period are considered credit weaknesses.
  • The performance trigger will stop the revolving period if the cumulative gross loss ratio surpasses 0.75% during the first 6 months and 1.25% between the 7th and the 12th month.

Statistics:

  • The portfolio of underlying assets amounts to approximately EUR 650 million as of the 30 April 2025 pool cut-off date.
  • The Class A Asset Backed Floating Rate Notes due July 2037 have a principal amount of EUR 611M.
  • The Class B Asset Backed Floating Rate Notes due July 2037 have a principal amount of EUR 13M.
  • The balloon loans account for 49.2% of the total current outstanding balance.
  • The average balloon installment accounts for 52.15% of the initial loan amount.
  • The expected lifetime defects are 1.4%, and expected recoveries are 50.0%.

Sources:

  • Moody's Investor Service
  • "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" (August 2024)
  • https://ratings.moodys.com/rmc-documents/426427
  • https://ratings.moodys.com