DBRS Confirms and Upgrades Ratings of A-BEST 12, 14 and 15

DBRS Ratings Limited (DBRS) took the following rating actions on the notes issued by Asset-Backed European Securitisation Transaction Twelve S.r.l. (A-BEST 12), Asset-Backed European Securitisation Transaction Fourteen S.r.l. (A-BEST 14) and Asset-Backed European Securitisation Transaction Fifteen S.r.l. (A-BEST 15):

A-BEST 12:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (high) (sf)

A-BEST 14:
-- Class A Notes confirmed at AA (sf)
-- Class B Notes confirmed at A (sf)
-- Class C Notes confirmed at BBB (high) (sf)
-- Class D Notes confirmed at BB (high) (sf)
-- Class E Notes confirmed at BB (low) (sf)
-- Commingling Reserve Facility confirmed at BBB (high) (sf)

A-BEST 15:
-- Class A Notes upgraded to AAA (sf) from AA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (low) (sf)
-- Class C Notes upgraded to AA (sf) from BBB (sf)
-- Class D Notes upgraded to A (high) (sf) from BBB (low) (sf)
-- Class E Notes upgraded to A (low) (sf) from BB (sf)
-- Commingling Reserve Facility upgraded to BBB (high) from BBB (sf)

The ratings address the timely payment of interest and ultimate payment of principal on or before the final legal maturity dates on the payment dates in July 2029, April 2030 and April 2031 for A-BEST 12, A-BEST 14 and A-BEST 15, respectively.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults.
-- Probability of default (PD), recovery rate and prepayment loss assumptions.
-- The credit enhancement available to the notes to cover the expected losses at their respective rating levels.
All three transactions are securitisations of auto loan portfolios granted to Italian individual borrowers and companies originated and serviced by FCA Bank S.p.A. (FCA Bank), a joint venture that is 50.0% owned by Fiat Group and 50.0% owned by Crédit Agricole Consumer Finance. A-BEST 12 and A-BEST 15 were originally structured with revolving periods that ended in October 2017 and May 2019, respectively, and the two transactions have been amortising since then. A-BEST 14 is still in its revolving period, which was extended to May 2020 via an amendment in April 2018.

PORTFOLIO PERFORMANCE
Performance trends are consistent across the three portfolios in terms of delinquencies, defaults, recoveries and prepayments and remain with DBRS’s expectations.

Delinquencies have been trending upward but remain low. As of the May 2019 payment date, for A-BEST 12, A-BEST 14 and A-BEST 15, loans that were two to three months in arrears represented 0.2%, 0.4% and 0.1% of the outstanding portfolio balance, respectively, and the 90+ delinquency ratios were 0.3%, 0.1% and 0.1%, respectively. Under the servicer definition, loans are classified as defaulted once the borrower becomes insolvent, the loans are written-off by the servicer or they exceed 240 days in arrears for A-BEST 12 and 210 days in arrears for A-BEST 14 and A-BEST 15. Under this definition, defaults remain low, reaching cumulative amounts of 0.5% of the total receivables purchased since closing for A-BEST 12, 0.3% for A-BEST 14 and 0.2% for A-BEST 15. Recoveries stand at 20.1%, 7.8% and 4.5% of the cumulative default amount, for A-BEST 12, A-BEST 14 and A-BEST 15, respectively.

PORTFOLIO ASSUMPTIONS
For A-BEST 12, DBRS has updated its base case PD assumption to 2.2% from 2.4% and maintained its loss given default (LGD) assumption at 87.0%. For A-BEST 14, DBRS has maintained its base case PD and LGD assumptions at 3.0% and at 87.0%, respectively. For A-BEST 15, DBRS has updated its base case PD assumption to 2.3% from 3.0% and maintained its LGD assumption at 87.0%.

The default and recovery assumptions were based on quarterly historical vintage data from FCA Bank, which cover Q1 2008 to Q1 2017 and are broken down into categories reflecting the composition of the portfolio according to vehicle condition and borrower type. The updates of the PD and LGD assumptions for A-BEST 12 and A-BEST 15 are driven by a shift in portfolio composition toward lower default rate categories and drive the upgrades in these two transactions.

CREDIT ENHANCEMENT
As of the June 2019 payment date, for A-BEST 12, credit enhancement to the Class A Notes was 41.2%, up from 21.9% last year while credit enhancement to the Class B Notes was 14.5%, up from 7.8%. For A-BEST 15, credit enhancement to the Class A, Class B and Class C Notes was 9.3%, 8.8% and 4.3%, respectively, up from 9.0%, 8.5% and 4.2% last year, respectively, whereas credit enhancement to the Class D and Class E Notes remained at 2.7% and 1.7%, respectively, since the revolving period ended in May 2019. Lastly, for A-BEST 14, credit enhancement to the Class A, Class B, Class C, Class D and Class E Notes remained at 10.0%, 7.0%, 5.0%, 2.4% and 1.3%, given that the transaction is still in its revolving period.

For all transactions, the credit enhancement for each class of notes comes from the subordination of its respective junior notes. Each transaction benefits from a non-amortising cash reserve currently at its target amount, which for A-BEST 12 is EUR 11.2 million, for A-BEST 14 is EUR 23.1 million and for A-BEST 15 is EUR 14.0 million. The cash reserves provide liquidity support to the notes and credit support upon the legal final maturity date.

The commingling reserve in each transaction was funded by FCA Bank when the transaction closed. It can only be drawn in the event that the servicer is unable to perform the daily transfer of collections as a result of the insolvency of FCA Bank or if FCA Bank cannot indemnify the transaction for the non-payment of insurance premiums. The ratings of the Commingling Reserve Facilities are based on the credit strength of FCA Bank, the account banks where the funds are deposited and the Class C Notes, which rank senior to the Commingling Reserve Facilities in the priority of payments. The ratings of the Commingling Reserve Facilities assess the likelihood of a facility drawing and the capacity of the transaction to make timely interest payments on the facility.

DBRS factored into its analysis the loss of insurance premium payments not covered by the Commingling Reserve due to borrower prepayments.

Elavon Financial Services DAC (Elavon) acts as the account bank in A-BEST 12 and A-BEST 14 and BNP Paribas Securities Services, Milan branch (BNP Milan) acts as the account bank in A-BEST 15.

Based on the DBRS private ratings of Elavon and BNP Milan, the downgrade provisions outlined in the transaction documents and other mitigating factors inherent in the transaction structures, DBRS considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

FCA Bank is the swap counterparty in A-BEST 12 and A-BEST 15. UniCredit and Crédit Agricole Corporate & Investment Bank S.A. (CA CIB) are the joint standby swap counterparties in A-BEST 12. CA CIB is the sole standby swap counterparty in A-BEST 15. The DBRS private rating of FCA Bank is below the first rating threshold given the rating assigned to the senior notes as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. The swap counterparty risk is mitigated through the existence of the standby swap counterparties.

The transaction structure was analysed in Intex DealMaker considering the default rates at which the notes did not return all specified cash flows.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is “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. For A-BEST 14, 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 actions.

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: https://www.dbrs.com/research/333487/rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports and issuer data provided by Elavon and CA CIB and loan-level data from 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 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 these transactions took place on 1 August 2018. Regarding A-BEST-12, DBRS confirmed the Class A Notes and upgraded the Class B Notes. Regarding A-BEST 14, DBRS confirmed Classes A through D and the Commingling Reserve Facility and upgraded the Class E Notes. Regarding A-BEST 15, DBRS confirmed Classes A through D and the Commingling Reserve Facility and upgraded the Class E Notes.

The lead analyst responsibilities for this transaction have been transferred to Natalia Coman.

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”):
-- 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 and LGD of the current pool of loans for the Issuer are 2.2% and 87.0%, respectively, for A-BEST 12, 3.0% and 87.0%, respectively, for A-BEST 14 and 2.3% and 87.0%, respectively, for A-BEST 15.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50.0%, the rating of the A-BEST 12 Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50.0%, the rating of the A-BEST 12 Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. Furthermore, if both the PD and the LGD increase by 50.0%, the rating of the A-BEST Class A Notes would be expected to remain at AAA (sf).

A-BEST 12:
Class A Notes Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class B Notes Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

A-BEST 14:
Class A Notes Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

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

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

Class D Notes Sensitivity:
-- 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BB (sf)
-- 50% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (sf)

Class E Notes Sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in LGD, expected rating of B (high) (sf)
-- 25% increase in PD, expected rating of below B (sf)
-- 50% increase in PD, expected rating of below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of below B (sf)

The rating sensitivity of the Commingling Reserve Facility will mainly be determined by the rating movements on the Class C Notes and the DBRS private rating on FCA Bank.

A-BEST 15:
Class A Notes Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class B Notes Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)

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

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

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

The rating sensitivity of the Commingling Reserve Facility will mainly be determined by the rating movements on the Class C Notes or DBRS private rating on FCA Bank.

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: Natalia Coman, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date:
--A-BEST 12: 10 August 2015
--A-BEST 14: 16 May 2016
--A-BEST 15: 16 May 2017

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
Registered and incorporated under the laws of England and Wales: Company No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

--Master European Structured Finance Surveillance Methodology
--Rating European Consumer and Commercial Asset-Backed Securitisations
--Interest Rate Stresses for European Structured Finance Transactions
--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

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.