DBRS Assigns Ratings to MotoPark Finance plc

DBRS Ratings Limited (DBRS) assigned ratings of A (sf) and BBB (sf) to the Class A and Class B Notes, respectively, (the Rated Notes) issued by MotoPark Finance plc. The Issuer is a public company incorporated with limited liability under the laws of England and Wales, acting as a special-purpose entity specifically for the purpose of the transaction.

The transaction represents the issuance of notes backed by approximately GBP 540 million of receivables related to both hire purchase (HP) and personal contract purchase (PCP) auto loan contracts granted by FirstRand Bank Limited, acting through its London Branch (FirstRand Bank, Originator or Seller) to borrowers in England, Wales or Scotland (customers from Northern Ireland are not included). FirstRand Bank originates these loans through its trading name MotoNovo Finance and the underlying motor vehicles related to the finance contracts primarily relate to used passenger vehicles but also include new passenger vehicles, light commercial vehicles (LCV) and motorcycles.
The transaction includes a revolving period of 18 months. During this time, there are portfolio limits that restrict concentrations from exceeding specific thresholds.

The receivables are serviced by FirstRand Bank.

The ratings are based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure including form and sufficiency of available credit enhancement;
-- Credit enhancement levels are sufficient to support DBRS-projected expected cumulative net losses and residual value losses under various stress scenarios;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings assigned to the Rated Notes address the payment of timely interest on a monthly basis and principal by the legal final maturity date;
-- FirstRand Bank’s capabilities with regard to originations, underwriting, servicing and its financial strength;
-- DBRS conducted an operational risk review of FirstRand Bank’s premises in Cardiff, Wales and deems it to be an acceptable servicer;
-- The transaction parties’ financial strength with regard to their respective roles;
-- The credit quality of the collateral and historical and projected performance of the Seller’s portfolio;
-- The sovereign rating of the United Kingdom, currently at AAA; and
-- The transaction’s consistency of the legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology 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 structure was analysed in Intex DealMaker.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings 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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis is 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

DBRS received the following sets of data sourced from FirstRand Bank and provided through the transaction Arranger, HSBC Bank plc:

-- Static quarterly cumulative default and recovery data (with voluntary termination performance included separately) from Q4 2010 up to Q2 2017;
-- Static monthly cumulative recovery data from October 2012 up to May 2017;
-- Origination balances from Q4 2010 to Q2 2017; and
-- PCP early settlement / prepayment frequency and maturity data on a quarterly basis from Q1 2014 to Q3 2017.

DBRS was also provided with detailed stratification tables and the portfolio at loan level as at 31 December 2017.

DBRS did 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 data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

These ratings concern a newly issued financial instrument. These are the first DBRS ratings on this financial instrument.

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

-- Expected Default Rate used: Expected default of 5.7%, a 25% and 50% increase on the expected default.
-- Loss Given Default (LGD) Used: LGD of 63.4% at the A (sf) stress level, a 25% and 50% increase.
-- Residual Value (RV) Haircut: RV Haircut of 27.8% at the A (sf) level

DBRS concludes that for the Class A Notes, without stress applied to the RV Haircut:
-- A hypothetical increase of the expected default or LGD by 25%, ceteris paribus, would each lead to a downgrade of the Class A Notes to A (low) (sf).
-- A hypothetical increase of the expected default or LGD by 50%, ceteris paribus, would each lead to a downgrade of the Class A Notes to BBB (sf).
-- A hypothetical increase of the expected default and LGD by 25% would lead to a downgrade of the Class A Notes to BBB (sf).
--A hypothetical increase of the expected default by 50%, with a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to the downgrade of the Class A Notes to BBB (low) (sf).
-- A hypothetical increase of the expected default by 25%, with a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to the downgrade of the Class A Notes to BBB (low) (sf).
-- A hypothetical increase of the expected default and LGD by 50%, ceteris paribus, would lead to the downgrade of the Class A Notes to BB (sf).

DBRS concludes that for the Class B Notes, without stress applied to the RV Haircut:
-- A hypothetical increase of the expected default or LGD by 25%, ceteris paribus, would each lead to a downgrade of the Class B Notes to BBB (low) (sf).
-- A hypothetical increase of the expected default by 50%, ceteris paribus, would each lead to a downgrade of the Class B Notes to BB (high) (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would each lead to a downgrade of the Class B Notes to BB (sf).
-- A hypothetical increase of the expected default and LGD by 25% would lead to a downgrade of the Class B Notes to BB (sf).
-- A hypothetical increase of the expected default by 50%, with a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to the downgrade of the Class B Notes to B (high) (sf).
-- A hypothetical increase of the expected default by 25%, with a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to the downgrade of the Class B Notes to B (high) (sf).
-- A hypothetical increase of the expected default and LGD by 50%, ceteris paribus, would lead to the downgrade of the Class B Notes to Below B (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: Alex Garrod, Senior Vice President, EU ABS
Rating Committee Chair: Christian Aufsatz, Managing Director, Head of European Structured Finance
Initial Rating Date: 24 January 2018

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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (December 2017)
-- Legal Criteria for European Structured Finance Transactions (September 2017)
-- Operational Risk Assessment for European Structured Finance Servicers (October 2017)
-- Operational Risk Assessment for European Structured Finance Originators (October 2017)
-- Derivative Criteria for European Structured Finance Transactions (October 2017)
-- Interest Rate Stresses for European Structured Finance Transactions (December 2017)

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.