DBRS Assigns Rating to Auto ABS Spanish Loans 2018-1 F.T.

DBRS Ratings Limited (DBRS) assigned a rating of AAA (sf) to the Class A Notes (the Notes) issued by Auto ABS Spanish Loans 2018-1 F.T. (the Issuer).

The Notes are backed by a EUR 620 million pool of receivables related to new vehicle loans granted to private individuals and commercial entities as well as receivables related to used auto vehicle loans granted to private individuals residing or registered in the Kingdom of Spain by PSA Financial Services Spain E.F.C., S.A. (PSA Financial Spain or the Seller).

There is a reserve fund of EUR 5,270,000 available at closing that was funded by a subordinated loan from the Seller. The transaction has a scheduled 18-month revolving period from the Issue Date where principal collections may be used to purchase additional similar receivables that the Seller may offer, subject to eligibility criteria and concentration limits specified in the transaction documents. Principal amounts will not be repaid during the revolving period.

The rating addresses the timely payment of interest and ultimate repayment of principal by the legal final maturity date.

The rating is based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure and form and sufficiency of available credit enhancement.
-- Relevant credit enhancement in the form of subordination and a cash reserve.
-- Credit enhancement levels are sufficient to support the expected cumulative net loss assumption projected under various stress scenarios at AAA (sf) for the Class A Notes.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- PSA Financial Spain’s capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and ability of the servicer to perform collection activities on the collateral. DBRS conducted an operational risk review of PSA Financial Spain and deems it to be an acceptable servicer.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and presence of legal opinions addressing the assignment of the assets to the Issuer.

The transaction cash flow structure was analysed with Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating 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 information used for this rating include performance and portfolio data relating to the receivables sourced by PSA Financial Spain through its agent, Santander Global Corporate Banking.

DBRS received quarterly default and recovery data relating to the Seller’s originations on a cumulative basis from Q1 2010 to Q4 2017. Dynamic data was also provided relating to delinquencies and prepayment as well as preliminary pool data and stratifications of the final portfolio.

DBRS does 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 that the information available to it for the purposes of providing this rating was of satisfactory quality.

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

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 changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating:
-- Expected default of 2.8%: a 25% and 50% increase.
-- Expected LGD: 71.9%, a 25% and 50% increase (subject to a cap of 100%).

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: AAA, AA (high), AA (high), AA, AA (low), AA (high), AA and A (high)

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
Rating Committee Chair: Christian Aufsatz – Managing Director
Initial Rating Date: 20 September 2018

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor
London
EC3M 3BY
United Kingdom
Registered in England and Wales: No. 7139960

The rating methodologies and criteria 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
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- 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.