DBRS Assigns Provisional Rating to Silver Arrow S.A., Acting in Respect of its Compartment 7

DBRS Ratings Limited (DBRS) has today assigned a provisional rating to Silver Arrow S.A., acting in respect of its Compartment 7 (the issuer) as follows:

-- Class A Notes: AAA (sf)

The Class A Notes are backed by a pool of approximately €1.1 billion receivables related to German auto loan contracts originated by Mercedes-Benz Bank AG (MBB).

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

-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of subordination from overcollateralization and a fully funded reserve from the issue date.
-- Credit enhancement levels are sufficient to support the expected cumulative net loss assumption projected under various stress scenarios at a AAA (sf) standard for the Class A Notes.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. For this transaction, the rating addresses the payment of timely interest on a monthly basis and principal by the legal final maturity date.
-- MBB’s capabilities with regard to originations, underwriting, servicing and the financial strength of their parent company Daimler AG.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The credit quality of the underlying collateral and the ability of MBB to perform collection activities on the collateral.
-- The strong historical and projected performance of the seller’s portfolio.
-- The sovereign rating of the Federal Republic of Germany, currently at AAA.
-- The transaction’s consistency of the legal structure with the DBRS’s “Legal Criteria for European Structured Finance Transactions” and the presence of legal opinions that address the true sale of the assets to the issuer and non-consolidation of the special-purpose vehicle with the seller.

The transaction was modeled in Intex DealMaker.

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 DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include performance data relating to receivables provided by MBB. DBRS received historical gross loss and recovery data relating to MBB originations by quarterly vintages, on a cumulative basis, dating back to the first quarter of 2010. As well as default and recovery data, MBB provided delinquency and prepayment data which also goes back to the first quarter of 2010, as well as detailed stratification tables of the portfolio selected by MBB as at 31 May 2016, and an amortization schedule.

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.

This rating was disclosed to MBB and the arranger, Societe Generale S.A.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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 to the parameters used to determine the rating (the “Base Case”):

-- Probability of Default (PD) Rates Used: Base Case PD of 2.08%, a 25% and 50% increase on the base case PD.
-- Loss Given Default (LGD) Rates Used: Base case LGD Rate of 35%, a 25% and 50% increase in the base case LGD Rate.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would not lead to a downgrade of the AAA (sf) rating of the Class A Notes.
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would not lead to a downgrade of the AAA (sf) rating of the Class A Notes.
-- A hypothetical increase of the base case LGD by 25%, ceteris paribus, would not lead to a downgrade of the AAA (sf) rating of the Class A Notes.
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would not lead to a downgrade of the AAA (sf) rating of the Class A Notes.
-- A hypothetical increase of the base case PD by 25%, and a hypothetical increase of the base case LGD by 25%, ceteris paribus, would not lead to a downgrade of the AAA (sf) rating of the Class A Notes.
-- A hypothetical increase of the base case PD by 50%, and a hypothetical increase of the base case LGD by 25%, ceteris paribus, would not lead to a downgrade of the AAA (sf) rating of the Class A Notes.
-- A hypothetical increase of the base case PD by 25%, and a hypothetical increase of the base case LGD by 50%, ceteris paribus, would not lead to a downgrade of the AAA (sf) rating of the Class A Notes.
-- A hypothetical increase of the base case PD by 50%, and a hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (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: Alexander Garrod, Senior Vice President, EU ABS
Initial Rating Date: 20 June 2016
Initial Rating Committee Chair: Chuck Weilamann, Managing Director, Head of US ABS

DBRS Ratings Limited
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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/

The rating methodologies used in the analysis of this transaction are listed below:

-- Rating European Consumer and Commercial Asset-Backed Securitisations (30 September 2015)
-- Legal Criteria for European Structured Finance Transactions (19 February 2016)
-- Derivative Criteria for European Structured Finance Transactions (19 February 2016)
-- Operational Risk Assessment for European Structured Finance Servicers (31 December 2015)
-- Operational Risk Assessment for European Structured Finance Originators (15 December 2015)
-- Unified Interest Rate Model for European Securitisations (12 October 2015)

A description of how DBRS analysis structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.