Press Release

DBRS Morningstar Confirms Ratings of E-CARAT 12 plc

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May 27, 2022

DBRS Ratings Limited (DBRS Morningstar) confirmed its ratings on the notes issued by E-CARAT 12 plc, as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)

The ratings of the Class A and Class B notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses as of the May 2022 payment date.
-- Probability of default (PD), loss given default (LGD), and residual value (RV) haircut assumptions on a potential portfolio migration based on replenishment criteria.
-- Current available credit enhancement (CE) to the rated notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occurred.

The transaction is a securitisation of receivables related to both conditional sale and personal contract purchase (PCP) auto loan contracts granted by Vauxhall Finance plc (Vauxhall Finance) to mainly individual borrowers in England, Wales, Scotland, and Northern Ireland. The underlying motor vehicles related to the finance contracts consist of both new and used passenger vehicles and light commercial vehicles. The transaction is subject to RV risk through the presence of PCP contracts.

The transaction includes a one-year revolving period ending at the July 2022 payment date. The legal final maturity date is at the August 2029 payment date.

PORTFOLIO PERFORMANCE
Delinquencies have been low since closing with loans that are two to three months in arrears and more than three months in arrears both representing 0.1% of the outstanding portfolio balance, as of the May 2022 payment date.

According to the transaction documents, defaulted loans are defined as loans that have been declared as such by the servicer. As of the May 2022 payment date, voluntary terminations (VT) and credit defaults represented 0.0% and 0.1% of the total receivables purchased since closing. There has been no vehicle handbacks to date.

The cumulative net loss ratio is marginal at 0.04% of the total receivables purchased since closing. The cumulative net loss ratio is subject to a trigger set at 0.3% until the end of the revolving period. A breach of this trigger leads to the end of the revolving period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar maintained its base case PD at 6.4% since closing and decreased its LGD assumptions to 18.4% from 22.4% at closing. The decrease in the LGD is due to the removal of the adjustment applied in the context of the Coronavirus Disease (COVID-19) pandemic. DBRS Morningstar maintained its residual value haircuts at 41.2% and 35.7% at the AAA (sf) and AA (sf) rating levels, respectively.

CREDIT ENHANCEMENT
The CEs to the rated notes consist of the subordination of their respective junior notes and as of the May 2022 payment date were as follows:
-- CE to the Class A Notes of 21.0%.
-- CE to the Class B Notes of 14.8%.
The CE levels have remained unchanged since the DBRS Morningstar initial rating as the transaction is still in its revolving period.

The transaction benefits from an amortising liquidity reserve available to cover senior expenses, swap payments, and interests on the Class A and Class B notes. The target level is set at the maximum of 1% of the outstanding balance of the rated notes and 0.5% of the initial balance of the rated notes. As of the May 2022 payment date, it was at its target level of approximately GBP 3.2 million.

BNP Paribas Securities Services, London Branch (BNPPSS London) acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of BNPPSS London, 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 bank to be consistent with the ratings assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

BNP Paribas S.A. (BNP Paribas) acts as the swap counterparty for the transaction. DBRS Morningstar’s rating of BNP Paribas at “AA (low)” 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.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (19 May 2022).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

DBRS Morningstar 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 consider potential portfolio migration based on 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.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include loan-level data provided by Vauxhall Finance and investor reports provided by BNP Paribas Securities Services, Luxembourg Branch.

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 purposes of providing these ratings 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 10 June 2021, when DBRS Morningstar finalised its AAA (sf) and AA (sf) ratings on the Class A and Class B notes, respectively.

The lead analyst responsibilities for this transaction have been transferred to Natalia Coman.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (the Base Case):

-- DBRS Morningstar expected a lifetime base case PD, LGD, and RV haircut for the pool based on a hypothetical migration of the portfolio according to the replenishment criteria. 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 are 6.4% and 18.4%, respectively. The RV haircuts at the AAA (sf) and AA (sf) rating levels are 41.2% and 35.7%, respectively.
-- The risk sensitivity overview below illustrates the ratings expected if the PD, LGD, and the RV haircut increase by a certain percentage over the base case assumption. For example, if the RV haircut increases by 50%, the rating of the Class A Notes would be expected to fall to AA (sf), assuming no change in both the PD and LGD. If both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to AAA (sf), assuming no change in the RV haircut. Furthermore, if the PD, LGD and the RV haircut all increase by 50%, the rating of the Class A Notes would be expected to fall at A (high) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of AA (high) (sf)
-- 50% increase in RV haircut, expected rating of AA (sf)
-- 25% increase in both PD and LGD, expected rating of AA (high) (sf)
-- 50% increase in both PD and LGD, expected rating of AA (sf)
-- 25% increase in both PD and LGD and 25% increase in RV haircut, expected rating of AA (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of AA (low) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of AA (sf)
-- 50% increase in both PD and LGD and 50% increase in RV haircut, expected rating of A (high) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of AA (low) (sf)
-- 50% increase in RV haircut, expected rating of AA (low) (sf)
-- 25% increase in both PD and LGD, expected rating of AA (sf)
-- 50% increase in both PD and LGD, expected rating of AA (low) (sf)
-- 25% increase in both PD and LGD and 25% increase in RV haircut, expected rating of A (high) (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of A (high) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of A (high) (sf)
-- 50% increase in both PD and LGD and 50% increase in RV haircut, expected rating of A (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Natalia Coman, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 21 May 2021

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor,
London EC3M 3BY United Kingdom
Tel. +44 (0) 20 7855 6600
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: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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