DBRS Ratings Limited (DBRS) finalised the provisional ratings on the Class A Notes and Class B Notes (together, the Notes) issued by Globaldrive Auto Receivables U.K. 2019-A plc (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (high) (sf)
The Issuer is a public company with limited liability incorporated in England and Wales and serves as a special-purpose entity solely for the purpose of this transaction. The Notes are backed by a static pool of new and used car and light commercial vehicle loan receivables originated in the United Kingdom by FCE Bank plc (FCE) and relate almost entirely to the financing of Ford-branded vehicles. The receivables are serviced by FCE.
The transaction is static, and the underlying receivables consist of standard and trade cycle management (TCM) auto loan agreements. Under TCM contracts, the Issuer may be directly exposed to residual value risk if a borrower exercises their right to return the financed vehicle at maturity.
The ratings are based on a review by DBRS of the following analytical considerations:
-- The transaction capital structure, including form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS-projected expected cumulative net losses and residual value losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and payment of principal by the legal final maturity date.
-- FCE’s capabilities with regard to originations, underwriting and servicing and its financial strength.
-- DBRS conducted an operational risk review of FCE’s premises in Brentwood, United Kingdom, and deems it to be an acceptable servicer.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The credit quality of the collateral and historical and projected performance of the Seller’s portfolio.
-- The sovereign rating of the United Kingdom of Great Britain and Northern Ireland, currently rated AAA with a Stable trend by DBRS.
-- The transaction’s consistency with the legal structure in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, the presence of legal opinions that address the true sale of the assets to the Issuer and non-consolidation of the special-purpose vehicle with the Seller.
The transaction was analysed in Intex DealMaker.
All figures are in British pound sterling 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 “Global Methodology for Rating Sovereign Governments” at: http://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of information used for the ratings include performance and portfolio data relating to the receivables sourced by FCE through its agent, Lloyds Bank Corporate Markets plc.
DBRS received static cumulative gross and net loss data and dynamic delinquency, loss and recovery data from Q1 2010 to Q1 2019 split by product and vehicle type. DBRS also received vehicle realisation, turn-in and prepayment data along with loan-level data representing the provisional pool and summarised stratification tables.
DBRS does 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 that the information available to it for the purposes of providing this rating 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 newly issued financial instruments. These are the first DBRS ratings on these financial instruments.
This is the first rating action since the Initial Rating Date.
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 ratings:
-- Expected default of 2.9%: A 25% and 50% increase.
-- Expected LGD: 28%, a 25% and 50% increase.
-- Residual value haircut: 40.7% (at AAA (sf), 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 (high) (sf), AAA (sf), AAA (sf), AA (sf), AAA (sf), AA (high) (sf), AA (sf).
-- Class B Notes: AA (sf), AA (low) (sf), AA (sf), AA (low) (sf), A (high) (sf), AA (low) (sf), A (high) (sf), A (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 U.S. regulations only.
Lead Analyst: Alex Garrod, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 4 September 2019
DBRS Ratings Limited
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Registered in England and Wales: No. 7139960
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.
This press release was modified on 14 November 2019 to include the missing currency disclosure.