DBRS Ratings Limited (DBRS) confirmed its rating of the Class A notes issued by SC Germany Consumer 2014-1 UG (haftungsbeschränkt) (the Issuer) at AAA (sf).
The rating of the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in February 2028.
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.
The Issuer is a securitisation of German auto loans originated by Santander Consumer Bank AG (SCB), a subsidiary of Santander Consumer Finance SA. As of the February 2019 payment date, the EUR 210.2 million portfolio consisted of both secured (24.4% of the outstanding portfolio balance) and unsecured (75.6%) loans.
The transaction had an initial 36-month revolving period, which was due to mature in March 2017. However, the Seller exercised a Replenishment Termination Option, as outlined in the transaction documents, and the revolving period terminated in May 2016.
As of the February 2019 payment date, one- to two-month and two- to three-month delinquencies represented 1.2% and 0.6% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.2%. The cumulative default ratio was 3.8%.
DBRS conducted a loan-by-loan analysis of the current pool of receivables and has updated its base case PD and LGD assumptions to 6.2% and 80.0%, respectively.
As of the February 2019 payment date, CE to the Class A Notes was 69.0%, increased from 10.7% at the time of the DBRS initial rating as a result of amortisation. CE is provided by the subordination of the Class B notes.
A non-amortising reserve of EUR 13.5 million, equal to 1.0% of the initial balance of the Class A and Class B notes, was funded at closing and provides liquidity support to the Class A and Class B notes.
The Bank of New York Mellon, Frankfurt Branch (BNYM) acts as the account bank for the transaction. Based on the DBRS private rating of BNYM, 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 bank 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.
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.
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 SCB 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 not 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.
The last rating action on this transaction took place on 14 March 2018, when DBRS upgraded the rating of the Class A notes to AAA (sf) from AA (sf).
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 6.2% and 80.0%, 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to remain at AAA (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 remain at AAA (sf).
Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
For further information on DBRS historic 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: 20 March 2014
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
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.