DBRS Confirms Ratings on Secucor Finance 2013-I DAC

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by Secucor Finance 2013-I DAC (the Issuer):

-- Class A1 Notes confirmed at AA (sf)
-- Class A2 Notes confirmed at AA (sf)

The ratings on the Class A1 Notes and Class A2 Notes (together, the Class A Notes) address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of charge-off rate and monthly payment rate as of the May 2018 payment date.
-- Current available credit enhancement to the notes to cover the expected losses at the AA (sf) rating level.
-- No revolving termination events have occurred.

Secucor Finance 2013-I DAC is a securitisation of a revolving portfolio of consumer credit receivables originated and serviced by Financiera El Corte Inglés E.F.C., S.A. (FECI), the captive finance company of the El Corte Inglés, S.A. (ECI) distribution group. The receivables represent the amortising consumer loans and store charge card credit facilities issued to ECI customers. The transaction closed in November 2013, with a revolving period currently scheduled to end in April 2021, and uses a cross-border structure whereby the securitised receivables are transferred to the Issuer, an Irish special-purpose vehicle.

PORTFOLIO PERFORMANCE
As of the May 2018 payment date, the monthly principal payment rate was 50.9% of the performing principal balance at the beginning of the reporting period, and the annualised charge-off rate was 1.1% of the performing principal balance at the beginning of the reporting period.

As of May 2018, two- to three-month arrears represented 0.4% of the outstanding portfolio balance, in line with 0.4% in May 2017. As of May 2018, the 90+ delinquency ratio was 0.1%, in line with 0.1% in May 2017. As of May 2018, the cumulative default ratio was 0.1%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the outstanding pool of receivables and has maintained its base case charge-off rate and monthly payment rate assumptions:
-- FCC: monthly payment rate and charge-off rate at 14.8% and 7.2%, respectively.
-- FSC: monthly payment rate and charge-off rate at 21.8% and 1.9%, respectively.
-- TS9: monthly payment rate and charge-off rate at 93.5% and 7.4%, respectively.
-- TSC: monthly payment rate and charge-off rate at 95.3% and 2.0%, respectively.

CREDIT ENHANCEMENT
As of the May 2018 payment date, credit enhancement to the Class A Notes was 28.1%, up from 20.0% at the DBRS initial rating. The transaction has dynamic credit enhancement and borrowing base calculations. The credit enhancement to the Class A1 and A2 Notes is provided by the subordination of the Class B Variable Funding Notes, the excess spread, and the Reserve Fund. The Reserve Fund of EUR 9 million, equal to 1.5% of the outstanding balance of the Class A Notes, is available to cover senior fees, expenses and any interest shortfall on the Class A Notes.

BNP Paribas Securities Services S.A., Spanish Branch acts as the account bank for the transaction. The DBRS private rating of BNP Paribas Securities Services S.A., Spanish Branch is consistent with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

In addition, Banco Santander S.A., Banco Bilbao Vizcaya Argentaria S.A. and CaixaBank S.A. act as the collection account banks for the transaction.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “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.

An asset and a cash flow 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.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

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.

The sources of data and information used for these ratings include investor reports provided by Deutsche Bank AG, London Branch, servicer reports provided by FECI and loan-level data provided by the European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of the initial rating, DBRS was not 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.

The last rating action on this transaction took place on 1 June 2017, when DBRS confirmed the ratings of the Class A1 and Class A2 Notes at AA (sf).

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of 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”):

-- DBRS expected a lifetime base case Charge-Off Rate and Payment Rate for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case Charge-Off Rate and Payment Rate of FCC, FSC, TS9, TSC products of the current pool of loans for the Issuer are 7.2%, 1.9%, 7.4%, 2.0% and 14.8%, 21.8%, 93.5% and 95.3%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the Charge-Off Rate and Payment Rate increase by a certain percentage over the base case assumption. For example, if the Payment Rate increases by 50%, the rating of the Class A Notes would be expected to remain at AA (sf), assuming no change in the Charge-Off Rate. If the Charge-Off Rate increases by 50%, the rating of the Class A Notes would be expected to remain at AA (sf), assuming no change in the Payment Rate. Furthermore, if both the Charge-Off Rate and Payment Rate increase by 50%, the rating of the Class A Notes would be expected to fall to AA (low) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in Charge-Off Rate, expected rating of AA (sf)
-- 50% increase in Charge-Off Rate, expected rating of AA (sf)
-- 25% increase in Payment Rate, expected rating of AA (sf)
-- 50% increase in Payment Rate, expected rating of AA (sf)
-- 25% increase in Payment Rate and 25% increase in Charge-Off Rate, expected rating of AA (sf)
-- 25% increase in Payment Rate and 50% increase in Charge-Off Rate, expected rating of AA (sf)
-- 50% increase in Payment Rate and 25% increase in Charge-Off Rate, expected rating of AA (sf)
-- 50% increase in Payment Rate and 50% increase in Charge-Off Rate, expected rating of AA (low) (sf)

For further information on DBRS historic 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: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 5 November 2013

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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
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions

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.