DBRS Confirms Ratings of KMU Portfolio S.A, Compartment 2009-1

DBRS Ratings Limited (DBRS) has reviewed KMU Portfolio S.A, Compartment 2009-1 (the Issuer) and confirmed the ratings on the following notes:

-- Class A confirmed at AAA (sf)

The confirmation of the ratings for the Class A Notes is based upon the following analytical consideration, as described more fully below:

-- Portfolio performance, in terms of level of delinquencies and defaults, as of the 13 July 2015 payment date.
-- Current available credit enhancement to the Class A Notes to cover expected losses assumed in line with a AAA (sf) rating level.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.

KMU Portfolio S.A, Compartment 2009-1 is a securitisation of German loans and leases on cars, trucks, boats, machinery and equipment (excluding residual value) originated by both AKF Bank GmbH & Co. KG. and AKF Leasing GmbH & Co. KG., and serviced by AKF Bank GmbH solely. The transaction closed in August 2009 and is currently in revolving period until August 2015.

As of the 13 July 2015 payment date, the 30+ delinquency ratio was 1.02%. The cumulative gross default ratio was at 1.62% of the aggregated collateral balance with a recovery rate of 79.16% up to date. In Germany, loans and leases are classified as defaulted when the contract is formally ‘terminated’ by the lender. The Servicer typically terminates contracts after the third missed payment.

Subordination to the Class A Notes (as a percentage of the collateral balance) is equal to 23.50%, composed of the Class B and Class C Notes.

The transaction benefits from a Liquidity Reserve available to cover any shortfall in senior expenses and/or Class A and Class B interest payments. Once the revolving period ends and only after the notes outstanding balance is less than 50% of the original notes balance, the reserve will start amortising down to 7% of the notes outstanding balance with a EUR 5 million floor.

Bank of New York Mellon – Frankfurt Branch holds the Treasury Account for the transaction. The DBRS public rating of Bank of New York Mellon – Frankfurt branch complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

The Issuer has entered into an interest rate swap with DZ Bank AG to neutralise the interest rate risk arising between the fixed rate paid by the receivables and the floating interest rate of Class A notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable 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. DBRS conducted a partial review of the transaction legal documents, limited to the appointment of a new back-up servicer. The rest of the documents have remained unchanged since the most recent rating action.

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 servicer reports provided by AKF Bank GmbH & Co. KG.

DBRS does not rely upon third party due diligence in order to conduct its analysis. DBRS was not supplied with third party assessments. However this did not impact the rating analysis.

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.

The last rating action on this transaction took place on 29 July 2014, when the ratings for each class of Notes were confirmed.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the 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 Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.

-- In respect of Class A Notes, the Probability of Default (PD) of 6.85%, and Loss Given Default (LGD) of 68.62%.

-- 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 ratings for the Class A Notes would be expected to be lowered to AA (sf), all else equal. If the PD increases by 50%, the ratings for the Class A Notes would be expected to be lowered to AA (sf), all else equal. Furthermore, if both the PD and LGD increase by 50%, the ratings for the Class A Notes would be expected to decrease to A (high) (sf).

Class A Notes Risk Sensitivity (all outstanding Classes):
-- 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in PD, expected rating of AA (low) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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 Sánchez Rodríguez
Initial Rating Date: 12 June 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 4 August 2015

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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The rating methodologies and criteria 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
-- Unified Interest Rate Model for European Securitisations

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.