DBRS Confirms KMU Portfolio S.A, Compartment 2009-1

DBRS Ratings Limited (“DBRS”) has reviewed the Notes issued by KMU Portfolio S.A, Compartment 2009-1 (the “Issuer”) and confirmed the ratings of the Class A Notes to AAA (sf).

The confirmation of the ratings for the Class A Notes is based upon the following analytical consideration, as described more fully below:

• Portfolio performance, in terms of level of delinquencies and defaults, as of the 14 July 2014 payment date.
• Current available credit enhancement to the Class A Notes to cover expected losses assumed in line with a AAA (sf) rating level.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.

KMU Portfolio S.A, Compartment 2009-1 is a securitisation of German loans and leases on cars, trucks, boats, machinery and equipment (without Residual Value) originated by both akf Bank GmbH & Co. KG. and akf Leasing GmbH & Co. KG. but serviced by akf Bank GmbH only. The transaction closed in August 2009 and is currently in revolving period until June 2015.

As of the 14 July 2014 payment date, the 30+ delinquency ratio was 0.98%. The cumulative gross default ratio was at 3.12% of the aggregated collateral balance with a recovery rate of 79.16% up to date. In Germany, loans and leases are classified as defaulted when the contract is formally ‘terminated’ by the lender. The Servicer typically terminates contracts after the third missed payment.

Credit enhancement for the Class A Notes stems from the subordination of the Class B and Class C Notes. Credit enhancement to the Class A Notes (as a percentage of the collateral balance) remains unchanged and is equal to 20.00%.

The transaction benefits from a Liquidity Reserve available to cover any shortfall in senior expenses and/or Class A and Class B interest payments. Once the revolving period will end and only after the notes outstanding balance will be less than 50% of the original notes balance, the reserve will start amortising down to 7% of the notes outstanding balance with a EUR 5 million floor.

Bank of New York Mellon – London branch holds the Treasury Account for the transaction. The DBRS public rating of Bank of New York Mellon – London branch complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in EUR unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include servicer reports provided by akf Bank GmbH & Co. KG (the “Servicer”). DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 18 June 2013, when DBRS confirmed the ratings to AAA (sf) of the Class A Notes.

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

To assess the impact of the 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 Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. 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 receivables are 6.85% and 68.62%, respectively.
• The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increase by 50% the rating for the Class A Notes would be expected to decrease at A (high) (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to decrease to A (high) (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A Notes would be expected to decrease to BBB (high) (sf), all else being equal.

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of AA (sf).
• 50% increase in LGD, expected rating of A (high) (sf).
• 25% increase in PD, expected rating of AA (sf).
• 50% increase in PD, expected rating of A (high) (sf).
• 25% increase in PD and 25% increase in LGD, expected rating of A (high) (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 A (sf).
• 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“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 regulations only.

Initial Lead Analyst: David Sánchez Rodríguez
Initial Rating Date: 12 June 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Dylan Cissou
Rating Committee Chair: Chuck Weilamann

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

• Legal Criteria for European Structured Finance Transactions.
• Master European Structured Finance Surveillance Methodology.
• Operational Risk Assessment for European Structured Finance Servicers.
• Unified Interest Rate Model for European Securitisations.
• Rating European Consumer and Commercial Asset-Backed Securitisations.
• Derivative Criteria for European Structured Finance Transactions.