DBRS Ratings GmbH (DBRS Morningstar) 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 to the Class A Notes to cover the expected losses at the AA (high) (sf) rating level.
The Issuer is an Italian securitisation backed by a portfolio of auto receivables originated and serviced 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 2020 payment date, the EUR 603.1 million portfolio consisted of loans provided to both individual (91.9%) and commercial (8.1%) borrowers, used to finance the purchase of both new (86.5%) and used (13.5%) vehicles. The transaction closed in February 2018 and had an 18-month revolving period.
As of the January 2020 payment date, one- to two-month and two- to three-month delinquencies represented 0.2% and 0.1% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.1%. Gross cumulative defaults amounted to 0.2% of the aggregate initial portfolio balance, with cumulative recoveries of 4.8% to date.
DBRS Morningstar conducted a loan-by-loan analysis of the pool receivables and has updated its base case PD and LGD assumptions to 2.5% and 79.1%, respectively.
The subordination of the Class B Notes provides credit enhancement to the Class A Notes. As of the January 2020 payment date, credit enhancement to the Class A Notes increased to 11.1% from 9.0% 12 months ago and at the DBRS Morningstar initial rating following the end of the revolving period in August 2019 and start of amortisation of the Class A Notes in September 2019.
The transaction benefits from an amortising cash reserve, currently at its target level of EUR 6.3 million, available to cover senior expenses and interest payments on the Class A Notes. Additionally, a commingling reserve with a current balance of EUR 18.9 million has been funded and will become available to the Issuer in the event of any 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), which is one notch below the DBRS Morningstar public Long-Term Critical Obligations Rating (COR) of AA (low), the DBRS Morningstar private rating of BPSS-Milan, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar 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 Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
ING Bank N.V. (ING) acts as the swap counterparty for the transaction. DBRS Morningstar's public Long-Term COR of ING at AA (high) is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.
DBRS Morningstar analysed the transaction structure 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 Morningstar 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 “Global Methodology for Rating Sovereign Governments” at: https://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 SCA (the Calculation Agent) and loan-level data provided by the European DataWarehouse GmbH.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purpose of providing this rating to be of satisfactory quality.
DBRS Morningstar 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 8 February 2019, when DBRS Morningstar confirmed the rating of the Class A Notes at AA (high) (sf).
The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.
Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):
-- DBRS Morningstar 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 2.5% and 79.1%, 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 remain at AA (high) (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AA (high) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to AA (low) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (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 (high) (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 AA (low) (sf)
For further information on DBRS Morningstar 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 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: 26 February 2018
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
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
A description of how DBRS Morningstar 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.