DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A Notes issued by KOROMO S.A., acting in respect of its compartment 2 (the Issuer).
The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
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, as of the August 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the receivables.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.
-- No revolving termination events have occurred.
The Issuer is a securitisation of German auto loan receivables originated and serviced by Toyota Kreditbank GmbH. The transaction is currently in its revolving period, which is scheduled to end in October 2019. During the revolving period, the Issuer has the option to purchase new receivables, subject to the eligibility criteria and portfolio limits defined in the transaction documents, which have been met to date.
As of August 2019, two- to three-month arrears represented 0.03% of the outstanding portfolio balance, similar to the amount of 0.03% in August 2018. As of August 2019, the 90+ delinquency ratio was 0.11% and the cumulative default ratio was 0.47%.
DBRS conducted an analysis of the collateral pool and assumed a base case cumulative net loss (CNL) assumption of 1.56%. The CNL assumption continues to be based on the worst-case portfolio composition given that the transaction is currently in its revolving period.
As of the July 2019 payment date, credit enhancement to the Class A Notes was 7.5%, stable since the DBRS initial rating because of the transaction revolving period ending in October 2019. Credit enhancement to the Class A Notes consists of subordination of the Class B Notes.
The transaction benefits from a general reserve fund currently funded to the target level of EUR 8.9 million that is available to cover senior fees and Class A interest.
BNP Paribas Fortis SA/NV Germany Branch (BNP) acts as the account bank for the transaction. Based on the DBRS private rating of BNP, 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.
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 “Global Methodology for Rating Sovereign Governments” at: http://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.”
The sources of data and information used for this rating include investor reports provided by BNP Paribas Securities Services, Luxembourg Branch (the Paying 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 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 25 September 2018, when DBRS confirmed its rating of the Class A Notes at AAA (sf).
The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.
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 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 pool of loans for the Issuer are 3.3% and 48.1%, 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 (high) (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 AA (high) (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 A (high) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 24 October 2014
DBRS Ratings Limited
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Registered and incorporated under the laws of England and Wales: Company 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
-- 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 email@example.com.