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Rating Action:

Moody's assigns definitive ratings to ABS issued by Cars Alliance Auto Loans Germany

19 Jul 2010

Approx. EUR 1.614 billion of German Auto ABS rated

Frankfurt, July 19, 2010 -- Moody's Investors Service has assigned the following definitive ratings to several classes of asset-backed notes issued by Cars Alliance Auto Loans Germany FCT.

- Aaa to the EUR 873,000,000 Class A1-2010-1 Asset Backed Floating Rate Notes due 18 April 2023;

- Aaa to the Class R 20xx-y Asset Backed Floating Rate Notes due 18 January 2029 (EUR 690,300,000 issued amount at closing, up to EUR 1,746,000,000 maximum amount);

- Aa2 to the EUR 28,000,000 Class B 2010-1 Asset Backed Floating Rate Notes due 18 April 2023; and

- Aa2 to the Class S 20xx-y Asset Backed Floating Rate Notes due 18 January 2029 (EUR 22,200,000 issued amount at closing, up to EUR 56,000,000 maximum amount).

The definitive ratings for the Class R 20xx-y and Class S 20xx-y Notes above are on the actual notes amount issued from time to time that could change compared to the amount at closing due to further possible issuances, but will not exceed the maximum amount as listed above (i.e. EUR 1,746 million for Class R and EUR 56 million for Class S). In addition, the total rated amount for all classes of notes (i.e. Class A1, Class R, Class B and Class S) cannot exceed approx. EUR 1,802 million at any one time.

Moody's has not assigned a rating to:

- EUR 99,000,000 Class C 2010-1 Floating Rate Notes Asset Backed Notes due 18 April 2023;

- Class T 20xx-y Asset Backed Floating Rate Notes due 18 January 2029 (EUR 78,300,000 issued amount at closing, up to EUR 198,000,000 maximum amount).

In October 2007, this securitisation platform sponsored by RCI Banque (German branch) was set-up as revolving medium-term and short-term note program structure. In October 2007 the first series of medium-term (i.e. Class A, B and C notes) and short-term notes (Class R, S and T notes) were issued. Since then several series of short-term notes have been issued on an ongoing basis as part of this program. Going forward the issuer, a French FCT, may issue further Class R, Class S and unrated Class T notes up to the maximum notes amounts as listed above until the monthly payment date falling in July 2020 provided that certain trigger tests and eligibility criteria are met.

This transaction represents the second issuance of series Class A, series Class B and series Class C notes as part of the medium-term note securitisation program sponsored by RCI Banque (German branch) and another issuance of series Class R, Class S and Class T notes under the same program structure. The issuance proceeds are mainly used to pay back the currently outstanding notes of previously issued Class R, Class S and Class T notes.

Under this true sale securitisation program the issuer, Cars Alliance Auto Loans Germany FCT, securitises a revolving portfolio of auto loan receivables. The pool results from amortising loans as well as balloon loans granted to German retail clients in order to finance the purchase of new and used vehicles branded mainly Renault, Nissan and Dacia. This securitisation program has a fairly unique and complex structure with possible additional series of notes being issued during the program replenishment period (which ends in July 2020 if no trigger is breached before) according to a pre-defined mechanism and as long as certain conditions, such as, inter alia, no change in capital structure, are fulfilled.

According to Moody's, the ratings take account of, among other factors, (i) the positive performance of the securitised portfolio since 2007, (ii) the strong structural features mitigating commingling risk such as the specially dedicated collection account of the servicer under French law or the commingling reserve, (iii) the granular and diversified portfolio ensuring a minimum gross margin for the structure and (iv) the liquidity cushion provided by (1) the non-amortising general reserve in an amount of 1.0% of the maximum pool balance as well as (2) the commingling reserve since it is funded prior to a potential disruption of the servicing process (i.e. upon loss of certain ratings).

Moody's has mainly based its credit analysis of the portfolio on the historical performance data provided by the originator based on a portfolio that is representative of the one being securitised. The historical data analysis was complemented with the evaluation of the general market trend and other qualitative considerations. Therefore, Moody's has stressed the results obtained from the historical data analysis to account for (i) the fact that the historical data do not cover the maximum maturity of the securitized loan contracts, (ii) the uncertainty on the portfolio cash flows since loan contracts could be extended or instalment payments deferred in course of the servicing process, and (iii) the fact that delinquent receivables are in the portfolio on the closing date. Some of the main inputs tested in the modelling of the transaction are a mean gross default rate (before car sale) of 3.35%, a Coefficient of Variation (as ratio between mean default rate and standard deviation) of 50% and a recovery rate for defaulted receivables of approx. 34%.

The transaction V-Score is overall "Low / Medium", which is in line with the German auto loan ABS sector. Nonetheless, the structure is considered to be more complex than other transactions of this sector. Secondly, the back-up servicing arrangement poses some increased uncertainty as the structure relies strongly on RCI Banque S.A., German branch as servicer for the portfolio. As of the closing date, there is no back-up servicer in place and no trigger is incorporated to identify a back-up servicer prior to a potential servicer termination event such as actual servicer insolvency. Nevertheless, in Moody's opinion, the likelihood of severe disruptions in the servicing process is reduced as (1) RCI Banque (including the German activities which are managed via a branch instead of a separate legal entity) is highly integrated in the Renault S.A. (Ba1 / NP) group and considered to be strategically important for the Renault group to support the sale of vehicles across Europe even in times of deteriorating credit standing of the manufacturer itself, (2) the likelihood that a default on any of Renault group's financial obligations would result in the immediate liquidation of the Renault group (including RCI Banque operations) is low; and (3) the structure envisions the management company, Eurotitrisation, to take over the role as back-up servicer facilitator, i.e. finding a potential back-up servicer, if needed. Nonetheless, in case of significant deteriorations of Renault group's and / or RCI Banque's credit standing or strategic importance, some rating volatility could occur.

The principal methodology used in rating Cars Alliance Auto Loans Germany was "Moody's Approach to Rating European Auto ABS: More Rubber Set to Hit European Roads", published in November 2002 and "The Lognormal Method Applied to ABS Analysis", published in July 2000 and which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Rating Methodologies sub-directory on Moody's website. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

The ratings address the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal with respect to the notes by the legal final maturity. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

Moody's initially assigned provisional ratings to this transaction on 28 June 2010. To note, definitive ratings were assigned on 9 October 2007 to the debt issuance of Cars Alliance Auto Loans Germany Series 2007-1 notes.

Moody's will monitor this transaction on an ongoing basis. For updated monitoring information, please contact monitor.abs@moodys.com. To obtain a copy of Moody's Pre-Sale Report on this transaction, please visit Moody's website at www.moodys.com or contact our Client Service Desk in London (+44-20-7772 5454).

Frankfurt
Silvia Baumann
Asst Vice President - Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Milan
Alex Cataldo
Senior Vice President
Structured Finance Group
Moody's Investors Service
Telephone:+39-02-9148-1100

Moody's assigns definitive ratings to ABS issued by Cars Alliance Auto Loans Germany
No Related Data.
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