DBRS Ratings Limited (DBRS) finalised its provisional ratings of the Class A Notes and Class B Notes (the Rated Notes) issued by Auto ABS French Leases 2018 (the Issuer), a French Fonds Commun de Titrisation (FCT) as follows:
-- Class A Notes at AAA (sf)
-- Class B Notes at A (high) (sf)
The Notes are backed by certain lease receivables including residual value (RV) purchase option receivables related to auto lease agreements granted by Compagnie Générale de Crédit aux Particulier S.A. (Crédipar or the Seller) to private, commercial and professional lessees in France. Crédipar is a wholly owned subsidiary of PSA Banque France SA. The underlying receivables represent the right to receive payment of regular lease collections and vehicle realisation proceeds that are linked to the rights to receive all proceeds from the sale of the underlying vehicles. The security granted to the Issuer includes a first-ranking pledge without dispossession (gage sans dépossession) over the leased vehicles. The transaction is managed by France Titrisation and the receivables are serviced by Crédipar (the Servicer).
Upon closing, proceeds from the subscription of the Notes finance the purchase of the initial portfolio from Crédipar as the Seller. The general reserve is funded directly by Crédipar. The Class A Notes’ subordination consists of the Class B Notes (10%) and the Class C Notes (15%). The Class B Notes’ subordination consists of the Class C Notes (15%). The Rated Notes are supported by an amortising reserve fund, which covers senior fees, net swap payments and interest payment shortfalls on the Class A and Class B Notes and is made available in full to the applicable priority of payments on the general reserve final utilisation date.
The transaction is subject to a revolving period of six months, during which time the Seller may offer additional receivables and their related RV purchase option receivables. The Issuer can purchase these receivables so long as the eligibility criteria, portfolio limits, performance triggers and other conditions set out in the transaction documents are met. The repayment of principal of the Notes will be fully sequential with no payment of principal on the Class B Notes until the Class A Notes are redeemed in full.
The transaction represents further European issuance of notes backed by auto lease agreements through European subsidiaries of Banque PSA Finance. DBRS has previously assigned ratings to other transactions sponsored by Banque PSA Finance and Santander Consumer Finance co-owned entities in the United Kingdom, Italy, Spain and France.
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.
-- Credit enhancement levels are sufficient to support DBRS-projected expected cumulative net losses and RV losses under various stress scenarios at the AAA (sf) rating level for the Class A Notes and A (high) (sf) level 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.
-- Crédipar’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 Crédipar 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 Crédipar through the arranger, Banco Santander S.A.
DBRS received static quarterly cumulative default and recoveries data from Q1 2008 to Q2 2018. Dynamic data was also provided relating to outstanding balances, delinquencies, prepayments and RV performance as well as stratifications relating to the 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 3.2% and an expected loss given default (LGD) of 29.2%: a 25% and 50% increase.
-- RV haircut of 36.4% at a AAA (sf) level and 27.6% at a A (high) (sf) level: a 25% and 50% increase.
Scenario 1: A 25% increase in the expected default and expected LGD.
Scenario 2: A 50% increase in the expected default and expected LGD.
Scenario 3: A 25% increase in the expected RV haircut.
Scenario 4: A 25% increase in the expected default and expected LGD and a 25% increase in the RV haircut.
Scenario 5: A 50% increase in the expected default and expected LGD and a 25% increase in the RV haircut.
Scenario 6: A 50% increase in the RV haircut.
Scenario 7: A 25% increase in the expected default and expected LGD and a 50% increase in the RV haircut.
Scenario 8: A 50% increase in the expected default and expected LGD and a 50% increase in the RV haircut.
DBRS concludes that the expected ratings under the eight stress scenarios are:
-- Class A Notes: AAA (sf), AA (sf), AAA (sf), AA (high) (sf), AA (low) (sf), AA (sf), AA (low) (sf), A (high) (sf)
-- Class B Notes: A (high) (sf), A (sf), A (sf), A (low) (sf), BBB (high) (sf), BBB (low) (sf), BBB (low) (sf), BB (high) (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: 22 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.