Press Release

DBRS Morningstar Upgrades and Confirms Ratings on E-CARAT 12 Plc

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May 24, 2023

DBRS Ratings Limited (DBRS Morningstar) took the following rating actions on the notes issued by E-CARAT 12 Plc:

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (sf)

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

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 as of the May 2023 payment date.
-- Probability of default (PD), loss given default (LGD), and residual value (RV) haircut assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the rated notes to cover the expected losses at their respective rating levels.

The transaction is a securitisation of receivables related to both conditional sale and personal contract purchase (PCP) auto loan contracts granted by Vauxhall Finance plc (Vauxhall Finance) to mainly individual 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 is subject to RV risk through the presence of PCP contracts.

The transaction included a one-year revolving period, which ended at the July 2022 payment date. The legal final maturity date is at the August 2029 payment date.

On 4 April 2023, Vauxhall Finance’s entire business (except certain retained assets and liabilities) was transferred to PSA Finance UK Limited. Stellantis Financial Services UK Limited (Stellantis) is the new name for the combined businesses, and has replaced Vauxhall Finance as Seller, Servicer, and Calculation Agent for the transaction. Vauxhall Finance retains its role as Subordinated Lender and retains the right to exercise the call option.

PORTFOLIO PERFORMANCE
Delinquencies have been low since closing. As of the May 2023 payment date, loans that are two to three months in arrears and more than three months in arrears were at 0.1% and 0.3% of the outstanding portfolio balance, respectively, both up from 0.1% at the last annual review.

According to the transaction documents, defaulted loans are defined as loans that have been declared as such by the servicer. As of the May 2023 payment date, voluntary terminations (VT) and credit defaults represented 0.1% and 0.4% of the total receivables purchased since closing, up from 0.0% and 0.2%, respectively, at the last annual review, while vehicle handbacks to date were marginal.

The cumulative net loss ratio remained marginal since closing.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar decreased its base case PD to 5.6% from 6.4% since closing and increased its LGD assumptions to 20.3% from 18.4% at the last annual review. The assumptions are based on the remaining receivables as opposed to a potential migration of the receivables according to the replenishment criteria, now that the revolving period has ended. DBRS Morningstar maintained its RV haircuts at 41.2% at the AAA (sf) rating level.

CREDIT ENHANCEMENT
The CEs to the rated notes consist of the subordination of their respective junior notes and as of the May 2023 payment date increased since last annual review as follows:
-- CE to the Class A Notes to 33.6% from 21.0%.
-- CE to the Class B Notes to 23.7% from 14.8%.
The CE levels have increased since the revolving period ended at the July 2022 payment date.

The transaction benefits from an amortising liquidity reserve available to cover senior expenses, swap payments, and interests on the Class A Notes and Class B Notes. The target level is set at the maximum of 1.0% of the outstanding balance of the rated notes and 0.5% of the initial balance of the rated notes. As of the May 2023 payment date, it was at its target level of approximately GBP 1.8 million.

BNP Paribas London Branch (prior the merge, BNP Paribas Securities Services, London Branch or BNP Paribas London) acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of BNP Paribas London, 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 DBR 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 rating of BNP Paribas at AA (low) is above 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.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (7 February 2023) https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology..

Other methodologies referenced in this transaction are listed at the end of this press release.

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.

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/401817/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 loan-level data provided by Stellantis and investor reports provided by BNP Paribas, Succursale de Luxembourg (prior the merge, named BNP Paribas Securities Services, Luxembourg Branch).

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 27 May 2022, when DBRS Morningstar confirmed its ratings on the Class A Notes and Class B Notes at AAA (sf) and AA (sf), respectively.

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 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, LGD, and RV haircut for the pool based on remaining receivables. 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 are 5.6% and 20.3%, respectively. The RV haircut at the AAA (sf) rating level is 41.2%.
-- The risk sensitivity overview below illustrates the ratings expected if the PD, LGD, and the RV haircut increase by a certain percentage over the base case assumption. For example, if the RV haircut increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in both the PD and LGD. If both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the RV haircut. Furthermore, if the PD, LGD, and the RV haircut all increase by 50%, the rating of the Class A Notes would be expected to fall at AA (sf).

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

Class B Notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of AA (low) (sf)
-- 50% increase in RV haircut, expected rating of AA (sf)
-- 25% increase in both PD and LGD, expected rating of AA (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 (low) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of A (high) (sf)
-- 50% increase in both PD and LGD and 50% increase in RV haircut, expected rating of A (high) (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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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: 21 May 2021

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor,
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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