DBRS Confirms Ratings on Class A Notes and Class B Notes Issued by Asset-Backed European Securitisation Transaction Thirteen, Fondo de Titulización
AutoDBRS Ratings Limited (DBRS) confirmed the following ratings on the Class A Notes and the Class B Notes (the Rated Notes) issued by Asset-Backed European Securitisation Transaction Thirteen, Fondo de Titulización (the Issuer or A-BEST 13):
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (low) (sf)
The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- The amendments to the transaction becoming effective on 23 November 2017;
-- No Early Amortisation Events have occurred;
-- The overall portfolio performance as of the October 2017 payment date, particularly with regard to delinquencies and cumulative net losses;
-- Updated base case assumptions, considering the updated semi-annual vintage performance data received by DBRS;
-- The current available credit enhancement (CE) to the Class A Notes and to the Class B Notes to cover the expected losses assumed in line with the AAA (sf) and AA (low) (sf) rating levels, respectively.
The ratings on the Rated Notes address the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in August 2030.
A-BEST 13 is a securitisation collateralised by a portfolio of auto loans and lease agreements granted by FCA Capital España, E.F.C., S.A.U. (FCAE) in Spain. FCAE is a wholly owned Spanish subsidiary of FCA Bank S.p.A. (FCA), a joint venture equally detained by Fiat Chrysler Automobiles and Crédit Agricole Consumer Finance.
As of 23 October 2017, the balance of the Class A Notes was EUR 225.5 million, the balance of the Class B notes was EUR 36.5 million and the balance of the Class C Notes was EUR 53.0 million. The EUR 315.0 million securitised portfolio (excluding defaulted receivables) consisted of auto loans (81.6%) and auto leases (18.4%), granted both to individuals (72.1%) and corporates (28.0%).
AMENDMENTS
Becoming effective on 23 November 2017, the following amendments have been made to the transaction:
-- Extension of the revolving period for 12 months, until January 2019;
-- Decrease of the Class A Notes Margin to 0.4% from 1.0%;
-- Increase of the Issuer size by a total amount of EUR 62.7 million through the issuance of new Notes, which will be fungible with the existing Notes;
-- Increase of the Cash Reserve and the Commingling Reserve, proportional to the increase of the Issuer size;
-- Decrease of the Intermediation Fee paid to the Standby Swap Counterparty.
REVOLVING PERIOD
The transaction closed in December 2015 and had an original revolving period of 25 months. The purchase of new loans during the revolving period is subject to certain conditions and limitations (the Pool Eligibility Criteria); the revolving period will prematurely end after the occurrence of certain events, including the breach of the Three-Month Rolling Average Delinquency Ratio of 4.6% or if the Cumulative Default Ratio exceeds 6.4%.
Following the execution of the above-mentioned amendments, the revolving period will be extended by 12 months, until January 2019.
PORTFOLIO PERFORMANCE
As of the October 2017 payment date, one- to two-month and two- to three-month delinquencies were 1.1% and 0.3% of the portfolio balance, respectively, while delinquencies more than three months were 0.2%. Gross cumulative defaults, as a percentage of the original portfolio and cumulative transferred receivables, were 0.4%, with cumulative recoveries of 11.7%.
PORTFOLIO ASSUMPTIONS
DBRS has received updated vintage performance data, split between contract type (loans / leases), vehicle type (new / used) and client type (corporate / private). With the updated data, DBRS recalibrated its base case assumptions of gross default and recovery for each loan type, and updated the base case Probability of Default (PD) and Recovery Rate to 6.8% and 23.2%, respectively, excluding sovereign adjustment.
CREDIT ENHANCEMENT
CE for the Class A Notes and Class B Notes is provided by the subordination of the respective junior obligations, amounts standing on the Payments Account and the Cash Reserve account. As of the October 2017 payment date, the CE for Class A Notes and Class B Notes CE was 29.2% and 17.6%, respectively.
A-BEST 13 benefits from an amortising Cash Reserve Account, which is available to cover senior expenses and missed interest payments on the Class A and Class B Notes. This account was funded at closing with EUR 2.4 million, and its target balance is equal to 0.9% of the aggregate principal balance of the rated Notes, with a floor of EUR 500,000. Following the execution of the amendment, amounts standing on the Cash Reserve Account will increase to EUR 2.8 million.
The structure also includes a Commingling Reserve Account with a target amount set at 3.78% of the aggregate Notes balance. The amounts standing on this account will become part of the Issuer Available Funds if the Servicer fails to transfer to the Account Bank the collections derived from the securitised portfolio. The Comminlging Reserve Account will increase to EUR 14.3 million (from EUR 11.9 million) following the execution of the amendments.
BNP Paribas Securities Services, Spanish branch (BNP Spain) acts as Account Bank for this transaction. DBRS’s private rating of BNP Spain complies with the Minimum Institution Rating given the ratings assigned to the rated Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.
The Issuer entered into a Swap Agreement with FCA in order to hedge the interest rate mismatch between the Rated Notes, indexed to one-month Euribor, and the fixed interest rate payments from the collateral portfolio. The structure also includes a Standby Swap, where Unicredit Bank AG provides a financial and operational guarantee to FCA; if FCA fails to meet its obligations as Swap Counterparty, Unicredit Bank AG will step in to hedge the Issuer’s exposure. The Standby Swap Agreement defines downgrade provisions in line with DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.
Notes:
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings 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. DBRS has conducted a review of the transaction’s legal documents provided in the context of the aforementioned amendments. A review of any other transaction’s legal documents was not conducted as the documents have remained unchanged since the most recent rating action.
An asset and a cashflow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.
Other methodologies referenced in this transaction are listed at the end of this press release.
These 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” at:
http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.
The sources of data and information used for these ratings include performance data relating to the receivables provided by FCAE via the Arranger, UniCredit Bank AG, London branch. DBRS received historical performance data relating to FCAE’s originations by semi-annual vintages on a cumulative basis going back to 2007. Other sources of data and information include monthly reports provided by Titulización de Activos, S.G.F.T., S.A (the Management Company).
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on the transaction took place on 30 November 2016, when DBRS confirmed the rating on the Class A Notes at AAA (sf) and the rating on the Class B Notes at AA (low) (sf).
Information regarding DBRS ratings, including definitions, policies and methodologies, is 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”):
-- DBRS expected a base case probability of default (PD) and loss given default (LGD) for the portfolio based on a review of the current assets and the transaction’s replenishment criteria. 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 6.8% and 76.8%, respectively, excluding sovereign stress.
-- The Risk Sensitivity below illustrates the ratings expected for the Rated Notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to decrease to AA (sf) and the rating of the Class B Notes would be expected to decrease to A (sf), all else being equal. If the PD increases by 50%, the rating of the Class A Notes would be expected to decrease to AA (low) (sf) and the rating of the Class B Notes would be expected to decrease to A (low) (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to decrease to A (sf) and the rating of the Class B Notes would be expected to decrease to BBB (sf), all else being equal.
Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (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 AA (low) (sf)
-- 50% increase in PD, expected rating of AA (low) (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 (sf)
Class B Notes risk sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (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 and US regulations only.
Lead Analyst: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 1 December 2015
DBRS Ratings Limited
20 Fenchurch Street, 31st Floor
London EC3M 3BY
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.
-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
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.
Ratings
ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.