DBRS Ratings GmbH (DBRS) upgraded its rating of the Class A notes issued by SC Germany Vehicles 2013-1 UG (haftungsbeschränkt) (the Issuer) to AAA (sf) from AA (high) (sf).
The rating addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in October 2027.
The upgrade follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the August 2019 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement (CE) to the Class A notes to cover the expected losses at the AAA (sf) 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 (SCF), granted entirely to commercial customers in Germany. The EUR 107.7 million portfolio, as of the August 2019 payment date, consisted of loans for the purpose of purchasing new (48.7%) and used (51.3%) vehicles, of which 62.0% are amortising loans while the remaining 38.0% have a final balloon instalment. The transaction closed in October 2013 and incorporated a three-year revolving period, which ended on the October 2016 payment date.
As of the August 2019 payment date, loans that were 30 to 60-days delinquent represented 0.8% of the outstanding principal balance and 60 to 90-day delinquencies represented 0.5%, while delinquencies greater than 90 days represented 0.6%. Gross cumulative defaults amounted to 1.3% of the aggregate original and subsequent portfolios, of which 19.6% has been recovered to date.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and maintained its base case PD and LGD assumptions at 6.3% and 80.0%, respectively.
CE is provided by the subordination of the EUR 70.0 million Class B notes. As of the August 2019 payment date, CE to the Class A notes increased to 65.0% from 33.1% one year ago at the last rating action.
The transaction benefits from a non-amortising cash reserve available to cover senior fees and the interest due on the Class A notes. It is also available to cover the interest shortfall on the Class B notes, provided a Principal Deficiency Trigger Event has not occurred. The cash reserve remained at its target level of EUR 7.0 million since closing, which is equal to 1.0% of the initial balance of the Class A and Class B notes.
The deal is exposed to potential commingling and set-off risks as debtors may open accounts with the originator and collections are swept to the account bank on a monthly basis, on each payment date. As a mitigant, SCB in its capacity as servicer and originator will fund separate commingling and set-off reserves, if the DBRS rating of SCB’s parent company, SCF, falls below specific thresholds as defined in the legal documentation, or if certain ownership thresholds are breached. These reserves continue to be unfunded as no rating or ownership threshold triggers have been breached to date.
The Bank of New York Mellon, Frankfurt Branch (BNYM Frankfurt) acts as the account bank for the transaction. Based on the DBRS private rating of BNYM Frankfurt, 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.
The transaction structure was analysed in Intex DealMaker.
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 monthly 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 23 August 2018, when DBRS upgraded the rating of the Class A notes to AA (high) (sf) from AA (sf).
The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.
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 6.3% 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), ceteris paribus. If the PD increases by 50%, the rating of the Class A notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would also be expected to remain at AAA (sf), ceteris paribus.
Class A Notes 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 historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 23 October 2013
DBRS Ratings GmbH
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Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259
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.