DBRS Confirms Ratings on Auto ABS2 Compartiment 2013-A

DBRS Ratings Limited (DBRS) has today confirmed its ratings on the following notes issued by Auto ABS2 Compartiment 2013-A (the Issuer):
-- EUR 522,000,000 Class A Notes: confirmed at AAA (sf)
-- EUR 51,500,000 Class B Notes: confirmed at A (sf)

The confirmation of the rating on the Class A and Class B notes is based upon the following analytical considerations:
-- Portfolio Performance, in terms of delinquencies and defaults, as of the October 2015 payment date.
-- No Amortisation Events have occurred.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- Current available credit enhancement to the notes to cover expected losses assumed in line with the AAA (sf) rating level for the Class A Notes and the A (sf) rating level for the Class B Notes.

The notes are collateralised by a portfolio of vehicle operating lease contracts granted by Compagnie Générale de Crédit aux Particuliers (Crédipar) to French private commercial companies. The transaction closed in October 2013 and has a 24-month revolving period.

The deal is exposed to Residual Value risk, as the collateralised loans include, as of their purchase date, a component of up to 65% of “Car Sale Receivables”, corresponding to the purchase price of the vehicle payable to the Seller under the relevant buy-back agreement.

As of the October 2015 payment date, 30-60 day delinquencies and 60-90 day delinquencies were 0.29% and 0.12% of the principal outstanding balance, respectively, while delinquencies greater than 90 days were 0.07%. The cumulative gross default ratio was 1.20% of the aggregated original balance, with cumulative recoveries of 48.73%.

Credit Enhancement for Class A (33.73%) and Class B (26.72%) is provided by overcollateralisation, the subordination of the junior obligations, and from the General Reserve. Credit enhancement of both Class A and Class B notes increased in the May 2015 payment date from 30.23% and 23.22%, respectively, when the General Reserve required level increased from 1.25% to 4.75% of the outstanding balance of the Class A, Class B and Class C notes. Since closing, the General Reserve has always been at the required level.

A swap structure is in place to hedge the interest rate mismatch between the Class A and Class B notes, indexed to 1-month Euribor, and the fixed interest rate payments from the collateral portfolio. BNP Paribas and Natixis are the Counterparties of the Interest Rate Swap; the DBRS rating of BNP Paribas SA at A (high) and the private rating of Natixis comply with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

BNP Paribas Securities Services SCA is the Account Bank for this transaction, and Crédit Agricole S.A. acts as Specially Dedicated Account Bank. The DBRS private rating of BNP Paribas Securities Services SCA and the DBRS rating of Crédit Agricole S.A. at A (high) comply with the Minimum Institution Rating given the rating assigned to the notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “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. However, due to the inclusion of a revolving period in the transaction, and no change in assumptions, the initial analysis based on worst case replenishment criteria set forth in the transaction legal documents was assumed.

For this rating action a review of the transaction legal documents was not conducted, as the documents have remained unchanged since May 2015 when the general reserve level has been amended up to 4.75%.

Other methodologies referenced in this transaction are listed at the end of this press release. This 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 the DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of information used for this rating include information provided by France Titrisation (the Management Company) and loan-level data from the European DataWarehouse GmbH.

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 30 October 2014, when DBRS confirmed the rating assigned to Class A and Class B notes at AAA (sf) and A (sf), respectively.

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 compared with the parameters used to determine the rating (the base case):

-- DBRS expected a base case probability of default (PD), loss given default (LGD) and Residual Value Loss for the portfolio 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 receivables are 5.63% and 45.59%, respectively.
-- Residual Value Loss: For the Class A Notes, a stressed residual value of 18% and for the Class B Notes a stressed value of 13%.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to the Class B Notes maintaining a A (sf) rating.

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: Bruno Franco
Initial Rating Date: 31 October 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
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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
-- Unified Interest Rate Model for European Securitisations
-- Derivative Criteria for European Structured Finance Transactions

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.