Press Release

DBRS Morningstar Upgrades and Confirms Ratings on E-CARAT 11 plc

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March 01, 2022

DBRS Ratings Limited (DBRS Morningstar) took the following rating actions on the notes (collectively, the Rated Notes) issued by E-CARAT 11 plc (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (high) (sf)
-- Class E Notes confirmed at BB (high) (sf)
-- Class F Notes confirmed at BB (sf)
-- Class G Notes upgraded to B (sf) from 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 rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- No revolving termination event has occurred;
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective rating levels.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The transaction 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 closed in February 2020 and included an initial 12-month revolving period, which ended in April 2021.

PORTFOLIO PERFORMANCE
As of February 2022, loans that were one to two months in arrears represented 0.2% of the outstanding portfolio balance, while loans that were two to three months in arrears and loans more than three months delinquent both represented 0.1%. The gross cumulative net loss ratio amounted to 0.5% of the collateral balance.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the pool receivables and updated its base case PD and LGD assumptions to 5.8% and 21.7%, respectively, as DBRS Morningstar is no longer basing the analysis on the 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. The updated pool composition prompted the upgrade on the Class G Notes.

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 due to the pro rata amortisation of the Rated Notes; the Rated Notes will continue to pay on a pro rata basis until certain performance triggers will breach.

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 2.6 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 immediate economic contraction, leading in some cases to 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. These ratings are based on additional analysis to expected performance as a result of the global efforts to contain the spread of the coronavirus.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 9 December 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/389454/baseline-macroeconomic-scenarios-for-rated-sovereigns-december-2021-update and https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

On 2 November 2021, DBRS Morningstar updated its 8 May 2020 commentary outlining the impact of the coronavirus crisis on performance of DBRS Morningstar-rated auto ABS transactions in Europe. For more details, please see: https://www.dbrsmorningstar.com/research/387320/european-auto-abs-recovery-performance-update and https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect.

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 2022).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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: https://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/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 ratings, 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 2 March 2021, when DBRS Morningstar confirmed its 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.

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with 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 5.8% and 21.7%, 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 to 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 (high) (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 (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 (high) (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 (low) (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 BBB (low) (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 BB (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 (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 (low) (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 (low) (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 (low) (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of B (high) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of B (high) (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 (sf)
-- 50% increase in RV haircut, expected rating of B (sf)
-- 25% increase in both PD and LGD, expected rating of B (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 (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of B (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 (low) (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://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, Assistant Vice President
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: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://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].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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