DBRS Ratings Limited (DBRS) confirmed its AA (high) (sf) rating on the Class A Notes issued by Auto ABS Italian Loans 2018-1 S.r.l. (the Issuer).
The rating addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in January 2032.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their rating level.
-- No revolving termination events have occurred.
The Issuer is an Italian securitisation collateralised by a portfolio of auto loan receivables granted to Italian clients by Banca PSA Italia S.p.A., a joint venture equally owned by Banque PSA Finance and Santander Consumer Bank S.p.A. As of the January 2019 payment date, the EUR 742.0 million portfolio consisted of loans provided to both individual (91.7%) and commercial (8.3%) borrowers, used to finance the purchase of both new (89.4%) and used (10.6%) vehicles. The transaction closed in February 2018 and includes an 18-month revolving period, with the Class A Notes scheduled to begin amortising on the September 2019 payment date.
As of the January 2019 payment date, one- to two-month and two- to three-month delinquencies represented 0.15% and 0.05% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.03%. The cumulative default ratio was 0.05%.
DBRS conducted a loan-by-loan analysis of the pool of receivables and has updated its base case PD and LGD assumptions to 3.3% and 80.2%, respectively.
As of the January 2019 payment date, CE to the Class A Notes was 9.0%, remaining stable since the DBRS initial rating due to the transaction’s revolving period. CE is provided by the subordination of the Class B Notes.
The transaction benefits from an amortising cash reserve, currently at its target level of EUR 7.4 million, available to cover senior expenses and interest payments on the Class A Notes. Additionally, a commingling reserve with a current balance of EUR 20.2 million has been funded and will become available to the Issuer in the event of servicer disruption.
Banco Santander SA (Santander) acts as the Spanish Account Bank for the transaction while BNP Paribas Securities Services, Milan Branch (BPSS-Milan) acts as the Italian Account Bank. Based on the Account Bank reference rating of Santander at A (high) - being one notch below the DBRS public Long-Term Critical Obligations Rating of AA (low), the DBRS private rating of BPSS-Milan, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the Account Banks to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
ING Bank N.V. (ING) acts as the swap counterparty for the transaction. DBRS's public Long-Term Critical Obligations Rating of ING at AA (high) is above the First Rating Threshold as described in DBRS's "Derivative Criteria for European Structured Finance Transactions" methodology.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
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 at: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.
The sources of data and information used for this rating include investor reports provided by BNP Paribas Securities Services S.C.A. (the Calculation Agent) and loan-level data provided by the European DataWarehouse GmbH.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purpose of providing this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
This is the first rating action on this transaction since the initial rating date on 26 February 2018.
The lead analyst responsibilities for this transaction have been transferred to Joana Seara da Costa.
Information regarding DBRS ratings, including definitions, policies and methodologies is available at 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 (the Base Case):
-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 3.3% and 80.2%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to A (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to BBB (high) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 26 February 2018
DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
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 firstname.lastname@example.org.