DBRS Morningstar Confirms Ratings of E-CARAT 11 plc

DBRS Ratings Limited (DBRS Morningstar) confirmed the following ratings on the notes issued by E-CARAT 11 plc (the Issuer):

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

The rating of the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal maturity date in May 2028. The ratings on the Class B, Class C, Class D, Class E, Class F, and Class G Notes address the ultimate payment of interest and ultimate repayment of principal by the legal maturity date while junior to other outstanding classes of notes, but the timely payment of interest when they are the senior-most tranche.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses as of the February 2021 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels;
-- No revolving period termination events have occurred;
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The Issuer is a securitisation of receivables related to both conditional sale and personal contract purchase auto loan contracts granted by Vauxhall Finance plc (Vauxhall Finance, Originator, or Seller) to borrowers in England, Wales, Scotland, and Northern Ireland. The underlying motor vehicles related to the finance contracts consist of both new and used passenger vehicles and light commercial vehicles. The transaction has a 12-month revolving period, which is scheduled to end in April 2021.

PORTFOLIO PERFORMANCE
As of the February 2021 payment date, loans that were 30 to 60 days, and 60 to 90 days delinquent represented 0.2%, and 0.1% of the outstanding portfolio balance, respectively, while loans more than 90 days delinquent amounted to 0.1%. The gross cumulative defaults amounted to 0.5% of the aggregate initial portfolio balance, with cumulative recoveries of 77.9% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the pool receivables and maintained its base case PD and LGD assumptions at 5.9% and 21.8%, respectively, based on a worst-case portfolio composition as permitted by the concentration limits applicable during the revolving period. DBRS Morningstar maintained its residual value haircuts at 43.0%, 37.7%, 30.7%, 27.4%, 20.3%, 17.6%, and 6.0% at AAA (sf), AA (sf), A (sf), BBB (high) (sf), BB (high) (sf), BB (sf), and B (low) (sf), respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes. As of the February 2021 payment date, credit enhancement to the Class A, Class B, Class C, Class D, Class E, and Class F Notes was 27.8%, 20.8%, 15.8%, 11.8%, 8.5%, 6.8%, and 5.0%, respectively. The credit enhancement levels have remained unchanged since the DBRS Morningstar initial rating as the transaction is still in the revolving period.

The transaction benefits from a liquidity reserve available only if the principal collections are not sufficient to cover the shortfall of senior expenses, swap expenses, and Class A interest and, if not deferred in the waterfalls, the Class B, Class C, and Class D interest payments. The liquidity reserve is currently at its target level of EUR 4.4 million.

HSBC Bank plc acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of HSBC Bank plc, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar 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 Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

BNP Paribas SA (BNP Paribas) acts as the swap counterparty for the transaction. DBRS Morningstar's public Long Term Critical Obligations Rating of BNP Paribas SA at AA (high) is consistent with the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many ABS transactions, some meaningfully. The ratings are based on additional analysis and, where appropriate, adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar conducted additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand high levels of payment holidays in the portfolio. As of the February 2021 payment date, 6.6% of the outstanding portfolio balance had a payment moratorium.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 28 January 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/372842/global-macroeconomic-scenarios-january-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 8 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated ABS transactions in Europe. For more details, please see: https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

ESG CONSIDERATIONS

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

On 3 February 2023, DBRS Morningstar amended the above press release to correct information regarding the swap counterparty.

Notes:
All figures are in British pounds sterling unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (8 February 2021). 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 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 at: http://www.dbrsmorningstar.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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by Opel Vauxhall Finance, and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial rating, 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.

The last rating action on this transaction took place on 24 March 2020, when DBRS Morningstar finalised its provisional ratings on the Class A, B, C, D, E, F, and G Notes at AAA (sf), AA (sf), A (sf), BBB (high) (sf), BB (high) (sf), BB (sf), and B (low) (sf), respectively.

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

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

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):

-- DBRS Morningstar 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 5.9% and 21.8%, respectively.
-- The RV haircuts of 43.0%, 37.7%, 30.7%, 27.4%, 20.3%, 17.6%, and 6.0% at AAA (sf), AA (sf), A (sf), BBB (high) (sf), BB (high) (sf), BB (sf), and B (low) (sf), respectively..
-- The risk sensitivity overview below illustrates the ratings expected if the PD, LGD and RV haircut increase by a certain percentage over the base case assumption. For example, if the PD and LGD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (low) (sf), ceteris paribus. If the RV haircut increases by 50%, the rating of the Class A Notes would be expected to fall tot AA (high) (sf), ceteris paribus. Furthermore, if the PD, LGD and RV haircut increase by 50%, the rating of the Class A Notes would also be expected to fall to A (high) (sf), ceteris paribus.

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

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

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

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

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

Class F Notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of BB (sf)
-- 50% increase in RV haircut, expected rating of BB (sf)
-- 25% increase in both PD and LGD, expected rating of BB (sf)
-- 50% increase in both PD and LGD, expected rating of BB (low) (sf)
-- 25% increase in both PD and LGD and 25% increase in RV haircut, expected rating of BB (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of BB (low) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of BB (low) (sf)
-- 50% increase in both PD and LGD and 50% increase in RV haircut, expected rating of B (high) (sf)

Class G Notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of B (low) (sf)
-- 50% increase in RV haircut, expected rating of B (low) (sf)
-- 25% increase in both PD and LGD, expected rating of BB (low) (sf)
-- 50% increase in both PD and LGD, expected rating of B (sf)
-- 25% increase in both PD and LGD and 25% increase in RV haircut, expected rating of B (high) (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of Below B (low) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of B (sf)
-- 50% increase in both PD and LGD and 50% increase in RV haircut, expected rating of B (sf)

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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Natalia Coman, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 24 February 2020

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
Tel. +44 (0) 20 7855 6600
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.dbrsmorningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (8 February 2021),
https://www.dbrsmorningstar.com/research/373435/master-european-structured-finance-surveillance-methodology.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (3 September 2020), https://www.dbrsmorningstar.com/research/366294/rating-european-consumer-and-commercial-asset-backed-securitisations.
--Rating European Structured Finance Transactions Methodology (21 July 2020),
https://www.dbrsmorningstar.com/research/364305/rating-european-structured-finance-transactions-methodology.
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (19 November 2020), https://www.dbrsmorningstar.com/research/370270/operational-risk-assessment-for-european-structured-finance-servicers.
-- Operational Risk Assessment for European Structured Finance Originators (30 September 2020), https://www.dbrsmorningstar.com/research/367603/operational-risk-assessment-for-european-structured-finance-originators.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021),
https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020), https://www.dbrsmorningstar.com/research/367292/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (24 September 2020),
https://www.dbrsmorningstar.com/research/367092/derivative-criteria-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.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].