DBRS Ratings Limited (DBRS) assigned provisional ratings to the Class A Notes and Class B Notes (the Rated Notes) issued by FACT S.A., acting in respect of its Compartment 2018-1 (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
The static transaction represents the issuance of Notes backed by a portfolio of receivables related to both lease (including those associated with the future sale of the associated leased vehicles) and loan receivables granted by Porsche Bank Aktiengesellschaft (Porsche Bank or the Seller) to debtors in Austria. The receivables are secured by trust rights associated with vehicles and other collateral.
The Class A Notes subordination consists of the Class B Notes (5.0%) and the Class C Notes (5.0%). The Class B Notes’ subordination consists of the Class C Notes. The Class A and Class B Notes are supported by a static cash collateral account equal to 0.5% of the initial principal balance of the portfolio, which covers senior fees, net swap payments and interest payment shortfalls on the Class A and Class B Notes. The cash collateral account is also ultimately available to repay principal on the Rated Notes on the final payment date.
Porsche Bank is a credit institution licensed under Austrian law and is a 100% subsidiary of Porsche Holding GmbH (Porsche Holding). In 2011, Porsche Holding was acquired by Volkswagen AG. Porsche Bank’s main market is in Austria, but the entity also operates in 15 other markets throughout east and southeast Europe as well as South America where it focuses on supporting the sale and financing of all brands within the Volkswagen group.
The receivables within the provisional portfolio are predominantly associated with Volkswagen-branded vehicles (52%), along with Audi (18%), Skoda (15%), Seat (14%) and other brands (1%). The receivables are serviced by Porsche Bank.
DBRS observes the following:
--The transaction is static and begins to amortise upon closing; there is no revolving period.
--The purchased receivables comprise both automotive leases and loans. The leases include a small proportion of operating leases (approximately 4%) and the remainder relate to financial leases.
--The portfolio comprises both fixed-rate and variable-rate receivables while floating-rate notes have been issued. The structure incorporates an interest rate swap where the notional is calculated according to the outstanding non-default, fixed-interest-rate receivables.
--The transaction is exposed to residual value risk through both operating and financial leases. However, the legal framework in Austria differs to many other European markets as, under financial lease agreements, the realisation loss at contract maturity is fully payable by corporate customers and partially payable by individual customers (75% of loss). Porsche Bank takes the full residual value risk under operating lease agreements.
--Approximately 17% of agreements relate to automotive loans, a proportion of these also include a final, larger balloon payment upon maturity.
--The receivables are purchased at their outstanding principal balance. They are not subject to a standardised discount rate and excess spread is not capitalised up front.
--The transaction’s waterfall combines interest and principal collections with available funds allocated sequentially to redeem the Rated Notes.
--The structure benefits from a commingling reserve fully funded at closing that represents scheduled collections from the following collection period plus 1.25% of the aggregation outstanding portfolio principal amount. However, the commingling reserve may be reduced as credit enhancement builds during the life of the transaction.
The ratings are based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure and form and sufficiency of available credit enhancement.
-- Relevant credit enhancement in the form of subordination and a cash reserve.
-- Credit enhancement levels are sufficient to support DBRS-projected expected cumulative net losses and residual value losses under various stress scenarios.at the AAA (sf) rating level for the Class A Notes and AA (sf) for the Class B Notes.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- Porsche Bank’s capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and ability of the Servicer to perform collection activities on the collateral. DBRS conducted an operational risk review of Porsche Bank and deems it to be an acceptable servicer.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and presence of legal opinions addressing the assignment of the assets to the Issuer.
The transaction was analysed in Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is “Rating European Consumer and Commercial Asset Backed Securitisations”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology on: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.
The sources of data and information used for these ratings include performance and portfolio data relating to the receivables sourced by Porsche Bank through their agent, Société Générale.
DBRS received static quarterly cumulative default and net loss data from Q1 2012 to and up to Q2 2018. Dynamic data was also provided relating to outstanding balances, delinquencies, prepayments and residual value performance as well as stratifications relating to the provisional portfolio.
DBRS does not rely upon third-party due diligence in order to conduct its analysis.
DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers that the information available to it for the purposes of providing these ratings was of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
These ratings concern a newly issued financial instrument. These are the first DBRS ratings on this financial instrument.
Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating:
-- Expected default of 1.7%: a 25% and 50% increase.
-- Expected loss given default (LGD): 35%, a 25% and 50% increase.
Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected default and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected default and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected default and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected default and 50% increase in the expected LGD.
DBRS concludes that the expected ratings under the eight stress scenarios are:
-- Class A Notes: AAA (sf) / AA (high) (sf) / AAA (sf) / AA (high) (sf) / AA (sf) / AA (high) (sf) / AA (sf) / AA (sf)
-- Class B Notes: AA (sf) / AA (sf) / AA (low) (sf) / A (high) (sf) / A (sf) / AA (low) (sf) / A (sf) / A (low) (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Alex Garrod, Senior Vice President
Rating Committee Chair: Erin Stafford, Managing Director
Initial Rating Date: 17 October 2018
DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at email@example.com.