DBRS Confirms Ratings on MotoPark Finance plc

DBRS Ratings Limited (DBRS) confirmed its ratings of the Class A and Class B Notes issued by MotoPark Finance plc (the Issuer) at A (sf) and BBB (sf), respectively.

The ratings of the Class A and Class B Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The confirmations follow an annual review of the transaction and are based on the following considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the January 2019 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the receivables;
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels;
-- No revolving period early termination events have occurred.

The Issuer is a securitisation of hire purchase and personal contract purchase auto loan contracts originated by FirstRand Bank Limited (FirstRand), acting through its London Branch through its trading name, MotoNovo Finance, to borrowers in England, Wales and Scotland. The receivables are serviced by FirstRand. The transaction is currently in its 18-month revolving period, scheduled to end in July 2019.

PORTFOLIO PERFORMANCE
As of the January 2019 payment date, two- to three-month arrears represented 0.3% of the outstanding portfolio balance, and 90+ day arrears represented 0.4%, both up from 0.0% at the initial rating. The Cumulative Net Loss Ratio was 0.5%.

PORTFOLIO ASSUMPTIONS
DBRS conducted an analysis on the receivables and maintained its base case PD, LGD and Residual Value (RV) Haircut assumptions as follows:
-- Base Case PD assumption of 5.7%
-- Base Case LGD assumptions of 63.4% and 61.1% at the A (sf) and BBB (sf) rating levels, respectively
-- RV Haircut assumptions of 27.8% and 23.3% at the A (sf) and BBB (sf) rating levels, respectively

CREDIT ENHANCEMENT AND RESERVES
As of the January 2019 payment date, CE to the Class A Notes was 6.0% and CE to the Class B Notes was 2.0%, both stable because of the transaction revolving period. CE is provided by subordination of the junior notes.

The transaction benefits from a Cash Reserve funded to its target balance of GBP 7.0 million, equal to 1.3% of the initial principal balance of the receivables. The Cash Reserve can be used to cover senior fees and interest on the Class A and Class B Notes.

HSBC Bank plc (HSBC) acts as the account bank for the transaction. Based on the DBRS private rating of HSBC, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to HSBC to be consistent with the ratings assigned to the notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

HSBC also acts as the swap counterparty for the transaction. DBRS's private rating of HSBC is above the First Rating Threshold as described in DBRS's "Derivative Criteria for European Structured Finance Transactions" methodology.

Notes:
All figures are in British pound sterling 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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports provided by HSBC.

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.

This is the first rating action on this transaction since the initial rating on 24 January 2018, where DBRS assigned ratings to the Class A and Class B Notes of A (sf) and BBB (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.

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 PD and LGD 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 PD assumption is 5.7% and the base case LGD assumptions are 63.4% and 61.1% at the A (sf) and BBB (sf) rating levels, respectively.
-- The RV Haircut assumptions are 27.8% and 23.3% at the A (sf) and BBB (sf) rating levels, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption, without any stress applied to the RV Haircut. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to BB (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD, expected rating of BBB (low) (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (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: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 24 January 2018

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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
-- Derivative Criteria 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.