DBRS Finalises Provisional Ratings on SC Germany Consumer 2015-1 UG

DBRS Ratings Limited (DBRS) has today finalised provisional ratings on the Class A, Class B, Class C and Class D Notes (collectively with the unrated Class E Notes, the Notes) issued by SC Germany Consumer 2015-1 UG (the Issuer) as follows:

-- AA (sf) on the Class A Fixed-Rate Notes
-- A (sf) on the Class B Fixed-Rate Notes
-- BBB (sf) on the Class C Fixed-Rate Notes
-- BB (sf) on the Class D Floating-Rate Notes

The Notes are backed by a revolving pool of receivables from consumer loans granted to individuals residing in Germany, originated and serviced by Santander Consumer Bank AG (SCB), which is owned by Santander Consumer Finance S.A.

The ratings are based on the considerations listed below:

-- The sufficiency of available credit enhancement in the form of subordination (17.5% for Class A, 10.25% for Class B, 7.45% for Class C and 4.2% for Class D Notes), in addition to excess spread.
-- The ability of the transaction’s structure and triggers to withstand stressed cash flow assumptions and repay the Notes according to the terms of the transaction documents.
-- SCB’s capabilities with respect to originations, underwriting and servicing.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

DBRS notes that there is a fixed and floating interest rate swap on the lowest-ranked Class D and Class E Notes and the swap payments (other than termination payments when the swap counterparty is the defaulting party under the swap agreement) rank ahead of the Class A, B and C Notes in the waterfalls. DBRS has considered the relevant interest rate scenarios and the impact of regular swap payments on the cash flows in accordance with its methodologies. Unquantifiable termination payments in a scenario when the Issuer is the defaulting party may also affect the more senior classes of notes without hedge. However, such circumstance is expected to be sufficiently remote for the purpose of the rating assignment, as DBRS does not factor in additional risks not related to rating scenarios (such as post-enforcement or issuer liquidation).

The transaction was modelled in Intex Dealmaker and the default rates at which the rated notes did not return all specified cash flows in a timely manner were determined.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: Rating European Consumer and Commercial Asset-Backed Securitisations.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
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 commentary “The Effect of Sovereign Risk on Securitisations in the Euro
Area” found at http://www.dbrs.com/research/239786.

The sources of information used for these ratings include performance and portfolio data relating to the loans originated by SCB. DBRS received historical performance default and recovery data relating to SCB’s originations by monthly vintage on a cumulative basis from January 2004 to August 2015 and from April 2006 to July 2015, respectively. Data was also provided relating to dynamic prepayments from January 2004 to August 2015. In addition, DBRS received stratification tables related to the provisional collateral portfolio that allowed DBRS to further assess the portfolio.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was 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.

These ratings concern newly issued financial instruments. These are the first DBRS ratings on these financial instruments.

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 ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- Probability of default (PD): base case of 7.6%, a 25% and 50% increase on the Base Case PD.
-- Loss given default (LGD): base case of 83%, increase to 90% and 100%.

DBRS concludes that for the Class A Notes:
-- A hypothetical LGD of 90%, ceteris paribus, would not result in a downgrade of the AA (sf) rating of the Class A Notes.
-- A hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to A (high) (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to A (high) (sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to A (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class A Notes to A (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class A Notes to A (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class A Notes to A (low) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class A Notes to BBB (high) (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical LGD of 90%, ceteris paribus, would not result in a downgrade of the A (sf) rating of the Class B Notes.
-- A hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to A (low) (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to BBB (high) (sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to BBB (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class B Notes to BBB (high) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class B Notes to BBB (low) (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class B Notes to BBB (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class B Notes to BB (high) (sf).

DBRS concludes that for the Class C Notes:
-- A hypothetical LGD of 90%, ceteris paribus, would not result in a downgrade of the BBB (sf) rating of the Class C Notes.
-- A hypothetical LGD of 100%, ceteris paribus, would not result in a downgrade of the BBB (sf) rating of the Class C Notes.
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would not result in a downgrade of the BBB (sf) rating of the Class C Notes.
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would result in a downgrade of the rating of the Class C Notes to BB (high) (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class C Notes to BBB (low) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class C Notes to BB (high) (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class C Notes to BB (high) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class C Notes to BB (low) (sf).

DBRS concludes that for the Class D Notes:
-- A hypothetical LGD of 90%, ceteris paribus, would not result in a downgrade of the BB (sf) rating of the Class D Notes.
-- A hypothetical LGD of 100%, ceteris paribus, would not result in a downgrade of the BB (sf) rating of the Class D Notes.
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would not result in a downgrade of the BB (sf) rating of the Class D Notes.
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would result in a downgrade of the rating of the Class D Notes to B (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class D Notes to B (high) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the Class D Notes to below B (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class D Notes to B (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the Class D Notes to below 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: Kevin Chiang
Initial Rating Date: 25 November 2015
Initial Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
1 Minster Court, 10th Floor Mincing Lane, London EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

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.
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers.
-- Operational Risk Assessment for European Structured Finance Originators.
-- Unified Interest Rate Model for European Securitisations.
-- Rating European Consumer and Commercial Asset-Backed 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