DBRS Assigns Provisional Ratings to Auto ABS UK Loans plc

DBRS Ratings Limited (DBRS) has today assigned provisional ratings as follows to the Notes issued by Auto ABS UK Loans plc (the Issuer):

Senior Notes
Class A1 Notes: AAA (sf)
Class A2 Notes: AAA (sf)
Class A3 Notes: AAA (sf)
Class A4 Notes: AAA (sf)
Class B Notes
Class B1 Notes: A (high) (sf)

The receivables to be securitised relate to auto loans originated in England, Wales, Scotland and Northern Ireland by PSA Finance UK Limited (PSA Finance) to private individuals or sole traders.

The ratings are based on review by DBRS of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement.
-- Relevant credit enhancement in the form of subordination and a cash reserve.
-- Credit enhancement levels are sufficient to support the expected cumulative net loss assumptions and residual value assumptions projected under various stress scenarios at AAA (sf) and ‘A’ (high) (sf) standard for the Senior Notes and Class B Notes, respectively, issued by Auto ABS UK Loans plc.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- PSA Finance's capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and ability of the servicer to perform collection activities on the collateral. DBRS conducted an operational risk review of PSA Finance and deems it to be an acceptable servicer.
-- 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.

The above-mentioned ratings are provisional. Final ratings will be issued upon receipt of an execution version of the governing transaction documents. To the extent that the documents and information provided to DBRS as of this date differ from the executed version of the governing transaction documents, DBRS may assign different final ratings to the Notes or may avoid assigning final ratings to the Notes altogether.

Notes:
All figures are in GBP 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 can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include performance and portfolio data relating to the receivables sourced by PSA Finance through Santander Global Corporate Banking. DBRS received quarterly gross loss and recovery data relating to PSA Finance originations on a cumulative basis from January 2006 to December 2015. Data was also provided relating to vehicle sales proceeds and turn in rates from January 2006 to December 2015 as well as stratifications relevant to the 2016 closing date. DBRS considers that the information available to it for the purposes of providing this rating was of satisfactory quality.

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

DBRS was supplied with third-party assessments at the issuance of the Notes; however, this did not impact the rating analysis.

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 in respect of the Class A1 and Class A4 Notes. These are the first DBRS ratings on these financial instruments.

The full report providing additional analytical detail is available by clicking on the link or by contacting us at info@dbrs.com.

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):

-- Probability of default (PD) rate used: base-case PD of 4.8%, a 25% and 50% increase on the base-case PD.
-- Recovery rate used: base-case recovery rate of 64.2%.
-- Loss given default (LGD): base-case LGD of 35.8%, a 25% and 50% increase on the base-case LGD.
-- Residual Value haircut: For Senior Notes, a Base Case of 43.7% and for Class B Notes, a Base Case of 34.0%. In both instances a 25% and 50% increase in Residual Value haircut.

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

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 a downgrade of the Class B Notes to A (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (sf) rating.
-- A hypothetical increase of the base case Residual Value haircut by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (high) (sf) rating.
-- A hypothetical increase of the base case Residual Value haircut by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value haircut by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value haircut by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value haircut by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (high) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value haircut by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (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: Alexander Garrod
Initial Rating Date: 29 April 2016
Initial Rating Committee Chair: Chuck Weilamann

Last Rating Date: Not applicable as no last rating date.
Lead Surveillance Analyst: Vito Natale

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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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- 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

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.

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