DBRS Assigns Provisional Ratings to Bonds Issued by BBVA Consumer Auto 2018-1, FT

DBRS Ratings Limited (DBRS) assigned the following provisional ratings to the Class A Notes, Class B Notes, Class C Notes and Class D Notes (together with the unrated Class E Notes and Class Z Notes, the Notes) to be issued by BBVA Consumer Auto 2018-1, FT. (the Issuer):

-- Class A Notes: AA (low) (sf)
-- Class B Notes: A (sf)
-- Class C Notes: BBB (sf)
-- Class D Notes: BB (sf)

The rating of the Class A Notes addresses the timely payment of interest and ultimate repayment of principal by the legal final maturity date. The ratings of the Class B Notes, the Class C Notes and the Class D Notes address the ultimate payment of interest and ultimate repayment of principal by the legal final maturity date.

The ratings will be finalised upon receipt of an execution version of the governing transaction documents. To the extent that the documents and information provided to DBRS to date differ from the executed version of the governing transaction documents, DBRS may assign a different final rating to the Notes.

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.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- The Originator/Servicer’s capabilities with respect to originations, underwriting and servicing.
-- DBRS conducted an operation risk review on Banco Bilbao Vizcaya Argentaria SA (BBVA) premises and deems it to be an acceptable servicer.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The sovereign rating of the Kingdom of Spain, currently at “A”.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, the presence of legal opinions that address the true sale of the assets to the Issuer and non-consolidation of the Issuer with the seller.

The transaction cash flow structure was analysed in Intex DealMaker.

Notes:
All figures are in euros 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.

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 on: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include data sourced from BBVA and provided through the transaction Arranger, Merrill Lynch International:

-- Static origination, cumulative defaults and cumulative recovery data going back to Q1 2010 and up to Q4 2017.

DBRS was also provided with detailed stratification tables and the portfolio at the loan-level as at 21 May 2018.

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 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:

-- Expected default of 7.73%: a 25% and 50% increase.
-- Expected loss given default (LGD) of 59.06%: a 25% and 50% increase.

Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected default and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected default and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected default and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected default and 50% increase in the expected LGD.

DBRS concludes that the expected ratings under the eight stress scenarios are:
-- Class A Notes: A (sf), BBB (high) (sf), A (sf), BBB (high) (sf), BBB (sf), BBB (high) (sf), BBB (sf), BB (high) (sf)
-- Class B Notes: BBB (high) (sf), BBB (sf), BBB (high) (sf), BBB (sf), BB (high) (sf), BBB (sf), BB (high) (sf), BB (low) (sf)
-- Class C Notes: BB (high) (sf), BB (low) (sf), BB (high) (sf), BB (low) (sf), B (sf), BB (low) (sf), B (sf), B (low) (sf)
-- Class D Notes: BB (sf), B (high) (sf), BB (low) (sf), B (high) (sf), B (low) (sf), B (high) (sf), B (low) (sf), and no rating can be assigned.

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: Maria Lopez, Vice President, Global Structured Finance
Rating Committee Chair: Chuck Weilamann – Managing Director, Head of US ABS
Initial Rating Date: 13 June 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
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Derivative Criteria for European Structured Finance Transactions
-- 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.