DBRS Morningstar Finalises Provisional Ratings on Autonoria Spain 2019, FT

DBRS Ratings Limited (DBRS Morningstar) finalised its provisional ratings on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, the Class F Notes, and the Class G Notes (the Rated Notes) issued by Autonoria Spain 2019, FT, as follows:

-- Class A Notes rated AAA (sf)
-- Class B Notes rated AA (sf)
-- Class C Notes rated A (sf)
-- Class D Notes rated BBB (sf)
-- Class E Notes rated BB (sf)
-- Class F Notes rated B (low) (sf)
-- Class G Notes rated C (sf)

The rating of the Class A Notes addresses timely payment of scheduled interest and ultimate repayment of principal by the legal final maturity date. The ratings for the Class B, Class C, Class D, Class E, Class F, and Class G Notes address the ultimate payment (then timely as most-senior class) of interest and ultimate repayment of principal by the legal final maturity date.

The rated notes are backed by a portfolio of receivables related to standard amortising loans granted by Banco Cetelem S.A.U. (the originator) to borrowers residing in the Kingdom of Spain. The originator will also service the portfolio.

The transaction includes a 12-month revolving period; during this time, the originator may offer additional receivables that the Issuer can purchase provided that the eligibility criteria and concentration limits set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers, seller default, or servicer termination.

The transaction features separate waterfalls for interest and principal. The Class A Notes benefit from credit enhancement in the form of subordination from the Class B to Class G Notes (21.0%). The Class B Notes benefit from a credit enhancement in the form of subordination from the Class C to Class G Notes (18.0%). The Class C Notes benefit from the credit enhancement in the form of subordination from the Class D to G Notes (12.5%). The Class D Notes benefit from the credit enhancement in the form of subordination from the Class E to Class G Notes (7.0%). The Class E Notes benefit from the credit enhancement in the form of subordination from the Class F to Class G Notes (5.0%). The Class F Notes benefit from the credit enhancement in the form of subordination from the Class G Notes (2.5%).

At the end of the scheduled revolving period, the transaction incorporates a mixed pro rata/potentially sequential amortisation mechanism. The Class A to Class F Notes pay a margin over one-month Euribor, whereas the portfolio pays a fixed interest rate. The interest rate risk arising from the mismatch between the Issuer’s liabilities and the portfolio is hedged through an interest rate swap provided by Banco Cetelem S.A.U., which in turn is guaranteed by BNP Paribas Personal Finance. The structure benefits from a liquidity reserve that will be funded at closing and be available to cover interest deficiencies only if principal collections are not sufficient to cover shortfalls.

DBRS Morningstar has rated several auto ABS transactions across European jurisdictions where BNP Paribas Personal Finance has acted as originator or as parent of the originator. Recent examples include Autonoria 2019, domiciled in the Republic of France and Florence SPV S.r.l., domiciled in the Republic of Italy.

The ratings are based upon DBRS Morningstar’s review of the following analytical considerations:
-- The transaction capital structure, including form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS Morningstar’s projected expected net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the rated notes.
-- The seller, originator and servicer’s capabilities with respect to originations, underwriting, servicing and financial strength.
-- DBRS Morningstar’s operational risk review of Banco Cetelem S.A.U., which deemed the bank to be an acceptable servicer.
-- The transaction parties’ financial strength regarding their respective roles.
-- The credit quality, diversification of the collateral and historical and projected performance of the seller’s portfolio.
-- DBRS Morningstar’s sovereign rating of the Kingdom of Spain at “A” with a Positive trend.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

DBRS Morningstar analysed the transaction cash flow structure 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 Morningstar 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 is based on the worst-case replenishment criteria set forth in the transaction legal documents.

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 “Global Methodology for Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The data and information used for these ratings include performance and portfolio data relating to the receivables provided by the originator directly or through the arranger, BNP Paribas.

DBRS Morningstar received quarterly cumulative default and recovery vintage data from January 2011 to June 2019. Further data was also provided, covering the period September 2013 to June 2019: dynamic monthly originations, outstanding receivables, arrears and prepayment data. The data received was further broken down into vehicle type subsets.

DBRS Morningstar understands that the historical data was performed on an aggregate portfolio of loans originated and that the default definition utilised to report the data is consistent with the definition applicable to the transaction.

DBRS Morningstar also received a set of stratification tables in relation to the loan pool as of 20 November 2019 and a theoretical amortisation profile.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

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

These ratings concern newly issued financial instruments. These are the first DBRS Morningstar rating on these financial instruments.

On 6 December 2019 DBRS Morningstar upgraded the initial provisional rating of the Class E Notes and confirmed the initial provisional ratings of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, the Class F Notes, and the Class G Notes, following the final pricing of the Notes.

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating:
-- Probability of Default (PD) Used: Expected PD of 4.8%, a 25% and 50% increase on the applicable PD.
-- Loss Given Default (LGD) Used: Expected LGD of 84.2%, a 25% and 50% increase on the applicable LGD.

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

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios are:
-- Class A Notes: AA (sf), AA (sf), AA (sf), AA (low) (sf), A (sf), AA (sf), AA (low) (sf), A (sf)
-- Class B Notes: AA (low) (sf), A (sf), A (high) (sf), A (low) (sf), BBB (high) (sf), A (high) (sf), A (low) (sf), BBB (high) (sf)
-- Class C Notes: BBB (high) (sf), BBB (sf), A (low) (sf), BBB (sf), BB (high) (sf), A (low) (sf), BBB (sf), BB (high) (sf)
-- Class D Notes: BB (high) (sf), BB (low) (sf), BB (sf), B (low) (sf), Below B (low), BB (sf), B (low) (sf), Below B (low)
-- Class E Notes: B (sf), Below B (low), B (low) (sf), Below B (low), Below B (low), B (low) (sf), Below B (low), Below B (low)
-- Class F Notes: Below B (low), Below B (low), Below B (low), Below B (low), Below B (low), Below B (low), Below B (low), Below B (low)
-- Class G Notes: The Class G Notes rating would not be impacted by a hypothetical change in either the PD or LGD.

For further information on DBRS Morningstar 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: Alexander Garrod, Senior Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 19 November 2019

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
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS Morningstar 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 [email protected].