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

DBRS Ratings Limited (DBRS) has today confirmed the rating of the Class A notes of SC Germany Auto 2013-2 UG (haftungsbeschränkt) (the Issuer) at AAA (sf).

The confirmation of the rating 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 June 2015 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 clients in Germany. The purpose of the loans was to purchase new (42.76%) or used (57.24%) vehicles as of June 2015.

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 0.09% as per the June 2015 payment date.

The Class A notes are supported by subordination of the Class B notes. Credit enhancement for the Class A notes increased to 19.82% from 8.50% at closing of the transaction in July 2013.

The deal benefits from a EUR 6.0 million amortising Reserve Fund, 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 or (ii) EUR 1.0 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 are 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 euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology,” which can be found on the DBRS website under Methodologies at http://www.dbrs.com/about/methodologies.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. A review of the transaction’s legal documents was not conducted, as the 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 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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary 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 does not rely upon third-party due diligence in order to conduct its analysis; DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the information made available to it for the purposes of providing this rating to have been 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 7 August 2014, when DBRS confirmed the Class A notes rating at AAA (sf).

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with 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 64.40%, 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 increases by 50%, the rating for the Class A notes would be expected to remain at 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 remain at 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.
-- 25% increase in LGD and 25% increase in PD, expected rating of AAA.
-- 25% increase in LGD and 50% increase in PD, expected rating of AAA.
-- 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.

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: 18 July 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale
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.