DBRS Confirms Rating on SC Germany Consumer 2014-1 UG (haftungsbeschränkt)

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Class A notes of SC Germany Consumer 2014-1 UG (haftungsbeschränkt) (the Issuer) at A (sf).

The confirmation of the rating on the Class A notes is based upon the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of defaults and level of delinquencies, as of the January 2015 payment date.
-- Actual gross default rate, recovery rate and expected losses are within DBRS’s expectations.
-- No early amortisation events have occurred.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the A (sf) rating level.

SC Germany Consumer 2014-1 UG (haftungsbeschränkt) is a securitisation of a pool of consumer loans granted to retail customers resident in Germany. The portfolio was originated and is serviced by Santander Consumer Bank AG. The deal follows the standard structure under the German Securitisation Law and closed in March 2014.
The transaction is still in its three-year revolving period during which the Issuer may purchase additional receivables. There are specific concentration limits and performance triggers to mitigate the potential portfolio performance deterioration. To date, all of them are met.

The portfolio is performing in line with DBRS’s expectations. As per the January 2015 payment date, the 90+ delinquency ratio as a percentage of the performing balance of the portfolio stayed at 0.16%. The gross cumulative default ratio as a percentage of the original portfolio increased over the year to 1.21%, but it is still below DBRS’s base case gross loss rate of 7.57%. Cumulative recoveries to date are low, but in line with DBRS’s assumptions from its initial rating analysis.

Credit enhancement to the Class A notes is mainly provided by subordination of the Class B notes and excess spread. Class A notes credit enhancement remained stable at 11.74% over the year, but the transaction is still in its three-year revolving period.

A non-amortising reserve fund of EUR 13.50 million (equal to 1.12% of the Class A notes balance) was funded on day one and provides liquidity support to the Class A and B notes. The reserve fund is currently at the initial and target level of EUR 13.50 million.

The Bank of New York Mellon, Frankfurt branch is the Account Bank for the transaction. DBRS’s private rating of The Bank of New York Mellon, Frankfurt branch is at least equal to the Minimum Institution Rating given the rating assigned to the Class A notes, as described in the DBRS Legal Criteria for European Structured Finance.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

The sources of information used for this rating include documentation provided by Santander Consumer Bank AG. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

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 to the parameters used to determine the rating (the Base Case):
-- DBRS expected a Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. 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 receivables are 7.57% and 82.92%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A notes and Class B notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increase by 50% the rating for the Class A notes would be expected to drop to BBB (low) (sf), all else being equal. If the PD increases by 50% the rating for the Class A notes would be expected to drop to BBB (low) (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A notes would be expected to drop to B (sf), all else being equal.

Class A Risk Sensitivity:

• 25% increase in LGD, expected rating of BBB (high) (sf).
• 50% increase in LGD, expected rating of BBB (low) (sf).
• 25% increase in PD, expected rating of BBB (high) (sf).
• 50% increase in PD, expected rating of BBB (low) (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of BBB (low) (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of BB (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of BB (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of B (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration (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 regulations only.

Initial Lead Analyst: David Sanchez Rodriguez
Initial Rating Date: 20 March 2014
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Chuck Weilamann

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 and are as follows:

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.