DBRS Confirms the Ratings to SC Germany Vehicles 2013-1 UG (haftungsbeschränkt)

DBRS Ratings Limited (“DBRS”) has reviewed SC Germany Vehicles 2013-1 UG (haftungsbeschränkt) (“the Issuer”) and has confirmed the ratings of the Class A Notes at ‘A’ (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 September 2014 Monthly Investor 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 ‘A’ (sf) rating level.

SC Germany Vehicles 2013-1 UG is a cash securitisation of auto loan receivables extended by Santander Consumer Bank AG (the “Originator”) to corporate entities and to commercial customers domiciled respectively resident in Germany. The purpose of the loans was to purchase new (45.43%) or used (54.57%) vehicles as of September 2014.

The transaction is still in its 3-year revolving period. Performance triggers and concentration limits are in place to mitigate the potential portfolio performance deterioration. To date, all of them have passed.

The pool is granular, seasoned (just under 2 years) and benefits from geographic diversification in Germany. Approximately 39.00% 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 0.25%. The 90+ delinquency ratio was also low at 0.14% as per the September 2014 payment date.

The Class A Notes are supported by subordination of the Class B Notes. Credit enhancement for the Class A Notes remains stable at 10%, but the transaction is still in the revolving period.

The deal benefits from a non-amortising Reserve Fund of EUR 7.00 million that provides liquidity support to the notes. The Reserve Fund will be used for repaying principal on the notes only on the payment date for which the outstanding balance of the portfolio is reduced to zero. The Reserve Fund is currently at the target level of EUR 7.00 million.

The deal is exposed to potential commingling risk and set-off risk (as debtors may open accounts with the Originator). As a mitigant to the potential commingling risk and set-off risk, the Originator undertakes to fund a Commingling Reserve as well as a Set-Off Reserve if the DBRS rating of Santander Consumer Finance SA Spain falls below specific thresholds as defined in the legal documentation.

The Bank of New York Mellon, Frankfurt Branch is the Account Bank for the transaction. The DBRS private ratings of Bank of New York Mellon, Frankfurt 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.

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 23 October 2013, when DBRS assigned final ratings of ‘A’ (sf) 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 6.49% and 59.75%, 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 A (low) (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to be A (low) (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 BB (sf), all else being equal.

Class A Notes Risk Sensitivity:

• 25% increase in LGD, expected rating of ‘A’ (sf).
• 50% increase in LGD, expected rating of A (low) (sf).
• 25% increase in PD, expected rating of ‘A’ (sf).
• 50% increase in PD, expected rating of A (low) (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of A (low) (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of BBB (low) (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of BBB (low) (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of BB (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 Sanchez Rodriguez
Initial Rating Date: 23 October 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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.
• EU ABS Methodology