BMW Vehicle Lease Trust 2021-1 - S&P Global

Presale:

BMW Vehicle Lease Trust 2021-1

February 25, 2021

Preliminary Ratings

Class A-1 A-2 A-3 A-4

Preliminary rating A-1+ (sf) AAA (sf) AAA (sf) AAA (sf)

Type Senior Senior Senior Senior

Interest rate(i) Fixed Fixed Fixed Fixed

Preliminary amount (mil. Expected legal final $) maturity date

190.0 March 25, 2022 465.0 March 27, 2023 465.0 Jan. 25, 2024 130.0 July 25, 2024

Note: This presale report is based on information as of Feb. 25, 2021. The ratings shown are preliminary. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed as evidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)The actual coupons of these tranches will be determined on the pricing date.

PRIMARY CREDIT ANALYST

Ethan Choi New York + 1 (212) 438 1043 ethan.choi @

SECONDARY CONTACT

Cara Mcgonigle New York +1 (212) 438-1792 cara.mcgonigle @

Profile

Expected closing date

March 10, 2021.

Collateral

Prime auto lease receivables.

Sponsor, servicer, and administrator BMW Financial Services N.A. LLC.

Origination trust

Financial Services Vehicle Trust.

Vehicle trustee

BNY Mellon Trust of Delaware.

UTI beneficiary

BMW Manufacturing L.P.

Depositor

BMW Auto Leasing LLC.

Indenture trustee

U.S. Bank N.A.

Owner trustee

Wilmington Trust N.A.

Lead Underwriter

Mizuho Securities USA LLC.

UTI--Undivided trust interest.



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Presale: BMW Vehicle Lease Trust 2021-1

Credit Enhancement Summary(i)

Overcollateralization (%) Initial Target

Reserve account (%) Initial Target

Total initial hard credit enhancement (%) Total target hard credit enhancement (%) Estimated excess spread per year (%)(ii) Discount rate (%) Initial aggregate securitization value ($) Total securities issued ($)

BMWLT 2021-1

14.15 16.30

0.25 0.25 14.40 16.55 5.07 6.45 1,456,027,970 1,250,000,000

BMWLT 2019-1

14.15 16.30

0.25 0.25 14.40 16.55 5.20 8.90 1,164,823,328 1,000,000,000

BMWLT 2018-1

14.15 16.30

0.25 0.25 14.40 16.55 4.79 8.95 1,164,824,956 1,000,000,000

(i)All percentages are based on the initial aggregate securitization value. (ii)For series 2018-1 and 2019-1, this reflects estimated annual excess spread at final pricing. BMWLT--BMW Vehicle Lease Trust.

Rationale

The preliminary ratings assigned to BMW Vehicle Lease Trust 2021-1's (BMWLT 2021-1's) asset-backed series 2021-1 notes reflect:

- The availability of approximately 22.3% credit enhancement in the form of 14.15% overcollateralization, which will build to a target of 16.30% of the initial securitization value; a 0.25% nonamortizing reserve account; and excess spread (all percentages are expressed as a percentage of the pool's initial securitization value);

- Our expectation that under a moderate ('BBB') stress scenario (2.0x our expected loss level), all else being equal, our preliminary 'AAA (sf)' ratings on the class A notes are consistent with the credit stability limits specified by section A.4 of the Appendix contained in S&P Global Ratings Definitions (published Jan. 5, 2021);

- The credit quality of the underlying collateral, which consists of prime auto lease receivables that have a weighted average FICO score of 792;

- The diversified mix of vehicle models in the pool;

- The expected timing of the residuals' maturities;

- The historical retention values of the vehicles in the pool;

- Automotive Lease Guide's (ALG's) forecast of the residual value at lease inception and of current residuals;

- The timely interest and full principal payments made by the notes' legal final maturity dates under cash flow scenarios that we stressed for credit and residual losses consistent with the preliminary ratings assigned to the notes; and

- The transaction's payment and legal structures.



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Presale: BMW Vehicle Lease Trust 2021-1

Our expected credit loss for the BMWLT 2021-1 pool is 0.50% of the securitization value, which reflects our static pool loss projections for BMW Financial Services N.A. LLC's (BMW FS') lease originations, the credit loss performance of earlier BMWLT securitizations, peer collateral comparisons, and our macroeconomic outlook. Our 'AAA' stress scenario for credit loss is 2.50% of the securitization value.

Our 'AAA' residual stress for the BMWLT 2021-1 pool is 26.83% of the pool's aggregate undiscounted base residual value, or 17.87% of the securitization value. In deriving our residual stress, we considered:

- BMWLT 2021-1's base residual values by model series;

- The historical residual gains and losses over ALG's forecast values by model series;

- The pool's residual maturity profile;

- The individual vehicle model and segment concentrations;

- The consistency of the ALG's residual forecasts in relation to the BMW vehicles' historical retention values;

- The ALG's current forecast for the residual value of the vehicles included in the BMWLT 2021-1 pool; and

- Our outlook on both the industry and the economy (see the Expected Loss section for more information).

Overall, our stressed 'AAA' credit and residual loss level is 20.37% of the securitization value. The credit enhancement outlined above (and in the Cash Flow Modeling section) provides adequate support for our assigned preliminary ratings.

S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the world. Widespread immunization, which will help pave the way for a return to more normal levels of social and economic activity, looks to be achievable by most developed economies by the end of the third quarter. However, some emerging markets may only be able to achieve widespread immunization by year-end or later. We use these assumptions about vaccine timing in assessing the economic and credit implications associated with the pandemic (see our research at ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

Transaction Overview

BMWLT 2021-1 is BMW FS' first publicly placed auto lease term securitization in 2021 and its 16th auto lease term transaction from the BMWLT platform since 2007.

Similarly to BMW FS' previous auto lease securitizations, the transaction includes a nonamortizing reserve account amount and initial overcollateralization with target levels that are nonamortizing.

The receivables backing the BMWLT 2021-1 pool will consist of the monthly lease payments and base residual values (as defined in the Residual Value section) of a pool of lease contracts originated by BMW dealers. The leased vehicles will consist of new BMW-brand passenger cars and SUVs.

The issuing trust will issue four tranches of class A notes. Note principal will be paid sequentially.



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Changes From The Series 2019-1 Transaction

Changes in credit enhancement from the series 2019-1 transaction include that: - The discount rate decreased to 6.45% from 8.90%.

The changes in the collateral composition from series 2019-1 include that: - The undiscounted base residual value of the pool as a percentage of securitization value

decreased to approximately 70.10% from 72.59% - The average undiscounted base residual value increased to approximately $26,951 from

$24,172. - Crossover utility vehicles (CUVs)/SUVs increased to 54.19% from 44.70% as a percentage of the

total undiscounted base residual value.

Legal Structure

The receivables backing the BMWLT 2021-1 notes will comprise monthly lease payments and base residual values of a pool of lease contracts originated by BMW dealers and assigned to the origination trust. All of the leased vehicles included in the transaction will be titled in the origination trust's name, Financial Services Vehicle Trust (a Delaware statutory trust). The origination trust will issue a special unit of beneficial interest (SUBI) certificate to BMW Manufacturing L.P., which will sell, transfer, and assign its interest in the series 2021-1 SUBI to BMW Auto Leasing LLC (the depositor). The depositor will, in turn, transfer and assign the certificate representing its interest in the series 2021-1 SUBI to BMWLT 2021-1 (the issuer). The issuer will issue four tranches of class A asset-backed notes in an aggregate principal amount of $1.25 billion. The issuer will pledge the SUBI certificate to the indenture trustee as security for the notes.



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In rating this transaction, we will review the legal matters we believe are relevant to our analysis, as outlined in our criteria.

Pension Benefit Guaranty Corp. (PBGC) risk

The PBGC could impose a lien against the assets of any member of BMW AG's controlled group if the minimum contribution payments to a defined benefit pension plan required by law are unpaid or if an underfunded defined benefit pension plan is terminated. As a member of the controlled group, BMW FS' assets (including those leases and leased vehicles designated to the series 2021-1 SUBI, which serves as the payment source to the issued series 2021-1 asset-backed notes) could be subject to a PBGC lien if the minimum contribution payments are not made or if there is a termination of an underfunded defined benefit plan. In our opinion, the risk of a PBGC lien on the leases and the residuals assigned to the series 2021-1 SUBI, which is pledged to the



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