DBRS Confirms the Ratings to SC Germany Auto 2013-2 UG (haftungsbeschränkt)

DBRS Ratings Limited (“DBRS”) has reviewed SC Germany Auto 2013-2 UG (haftungsbeschränkt) (“the Issuer”) and has confirmed the ratings of the Class A Notes at AAA (sf).

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

• Portfolio performance, in terms of defaults and delinquencies, as of the July 2014 payment report.
• Updated default, recovery and loss assumptions on the remaining balance of the collateral portfolio.
• Credit enhancement currently available to the Class A Notes to cover the expected losses assumed in the stress scenario associated with the AAA (sf) rating level.

SC Germany Auto 2013-2 UG is a static cash securitisation of auto loan receivables extended by Santander Consumer Bank AG to retail and commercial clients resident in Germany. The purpose of the loans was to purchase new (41.68%) or used (58.32%) vehicles.

The percentages of new and used vehicles initially stated in both the Pre-Sale (July, 4 2013) and Rating Report (July, 18 2013) were inadvertently transposed (with new percentages reflected as used, and used percentages reflected as new). However, the credit analysis and the derived base case assumptions were based on the correct stratification tables provided by the Originator. Consequently, the information reflected in the reports did not have any bearing on DBRS analysis at the time of issuance of either the provisional or final rating assigned to the Class A Notes. DBRS has replaced the correct percentages of new and used vehicles in both the Pre-Sale and Rating Report published on its website.

The pool is granular, seasoned (just under 2 years) and benefits from geographic diversification in Germany. Approximately 40% of the loans in the current portfolio have balloon payments.

The cumulative gross default ratio (calculated on the initial collateral balance) increased over the year but is still relatively low at 0.08%. The 90+ delinquency ratio was also low at 0.09% as per the July 2014 payment date.

The Class A Notes is supported by subordination of the Class B Notes. Credit enhancement for the Class A Notes increased to 13.98% from 9.50% at closing of the transaction in July 2013.

The deal benefits from an amortising Reserve Fund of six million Euros, which provides liquidity support to the notes. On each payment date, the Required Liquidity Reserve Amount is defined as: (a) 1% of the original balance of the Class A and Class B Notes, or (b) 2% of the outstanding balance of the Class A and Class B Notes, if the Class A and Class B Notes have reduced to 50% of the original balance. The Reserve Fund will also provide credit enhancement up to the excess of the Required Reserve Amount (defined as the higher of (i) the Required Liquidity Reserve Amount and (ii) EUR 1.00 million) over the Required Liquidity Reserve Amount.

A Set-Off Reserve was funded at closing of the transaction to mitigate the risk of cancellation of loan administration fees as well as set-off risk related to current accounts held with the Originator and capitalized premium of some insurance policies.

Deutsche Bank AG, London Branch is the Account Bank for the transaction. The DBRS private ratings of Deutsche Bank AG, London Branch is at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions. Additionally, HSBC Bank plc acts as Swap Counterparty for the deal. The current DBRS private rating of HSBC Bank plc complies with the DBRS Derivative Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euro 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 monthly investor reports provided by Santander Consumer Bank AG. 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 July 2013, when DBRS finalised the provisional rating of AAA (sf) assigned to 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 2.65% and 25%, 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 be AAA (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to remain at AAA (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 be AAA (sf), all else being equal.

Class A Notes Risk Sensitivity:

• 25% increase in LGD, expected rating of AAA (sf).
• 50% increase in LGD, expected rating of AAA (sf).
• 25% increase in PD, expected rating of AAA (sf).
• 50% increase in PD, expected rating of AAA (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of AAA (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of AAA (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of AAA (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of AAA (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: Paolo Conti
Initial Rating Date: 4 July 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Elisa Scalco
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.
• Derivative Criteria for European Structured Finance Transactions.
• Rating European Consumer and Commercial Asset-Backed Securitisations.