DBRS Confirms Ratings on Auto ABS3 FCT Compartiment 2014-1

DBRS Ratings Limited (DBRS) has today confirmed the following ratings on the Notes issued by Auto ABS3 FCT Compartiment 2014-1 (the Issuer):
-- EUR 397,300,000 Class A Notes at AAA (sf)
-- EUR 22,800,000 Class B Notes at A (high) (sf)

The ratings on the Class A and Class B Notes (together, the rated Notes) address the timely payment of interest and the ultimate payment of principal on or before the Final Legal Maturity Date in June 2027.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- The overall portfolio performance as of the November 2016 payment date is in line with DBRS’s initial expectations.
-- No Amortisation Events have occurred.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms and conditions of the rated Notes.
-- The current available credit enhancement to the rated Notes to cover expected losses assumed in line with AAA (sf) and A (high) (sf) rating levels.

The Issuer is the first compartment of Auto ABS3 FCT, a French securitisation fund jointly established by France Titrisation and Banque PSA Finance. The Notes are backed by a portfolio of auto loan receivables granted by Compagnie Générale de Crédit aux Particuliers (Crédipar) to retail clients residing in France. Effective since 2 February 2015, Crédipar is jointly indirectly owned by Santander Consumer Finance S.A. and Banque PSA Finance on an equal footing.

The transaction closed in December 2014 and has a 25-month revolving period ending in January 2017. The revolving period will prematurely end after the occurrence of certain events, including the breach of the Average Delinquency Ratio of 3.5%.

As of the November 2016 payment date, 31 to 60 days delinquencies and 61 to 90 days delinquencies were 0.2% and 0.1% of the principal outstanding balance, respectively, while delinquencies greater than 90 days were 0.1%. The gross cumulative default ratio, as a percentage of the initial portfolio and the cumulative transferred receivables, was 0.5%, with cumulative recoveries of 51.5%.

Credit enhancement (CE) is provided by the subordination of the junior obligations and the amounts standing on the General Reserve Account. As of November 2016, CE for the Class A Notes was 8.5% and CE for the Class B Notes was 3.2%.

The transaction benefits from an amortising General Reserve Account, which is available to cover senior expenses, missed interest payments on the rated Notes and, upon the occurrence of an Accelerated Amortisation Event, to repay principal on the rated Notes and the Class C Notes. This account was funded at closing by Crédipar with EUR 3.9 million, and its target balance is equal to 0.9% of the aggregate principal balance of the Notes.

A swap structure is in place to hedge the interest rate mismatch between the rated Notes, indexed to one-month Euribor, and the fixed interest rate payments from the securitised portfolio. Abbey National Treasury Services plc and Société Générale, S.A. (SocGen) are the Senior Swap Providers, and SocGen is the Mezzanine Swap Provider. The DBRS private rating of Abbey National Treasury Services plc and the Long-Term Critical Obligations Rating (COR) of SocGen at AA comply with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Natixis S.A. is the Account Bank for this transaction, and BNP Paribas SA (BNP) acts as Dedicated Account Bank. The DBRS private rating of Natixis S.A. and the reference rating of BNP of AA -- one notch below the DBRS COR of BNP at AA (high) -- comply with the Minimum Institution Rating, given the rating assigned to the rated Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Master European Structured Finance Surveillance Methodology”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. However, because of the inclusion of a revolving period in the transaction and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

In July 2016, there was an amendment to the transaction, and the Account Bank was replaced. A review of any other transaction legal documents was not conducted, as they 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 the 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 information provided by France Titrisation (the Management Company).

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 available to it for the purposes of providing this rating to be 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 15 December 2015, when the rating on the Class A Notes was confirmed at AAA (sf) and the rating on the Class B Notes was confirmed at A (high) (sf).

The lead responsibilities for this transaction have been transferred to Joana Seara da Costa.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 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 portfolio based on a review of the current assets and the transaction’s replenishment criteria. 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 3.2% and 54.5%, respectively.

-- The Risk Sensitivity below illustrates the rating expected for the rated Notes if the PD and LGD increase by a certain percentage over the Base Case assumptions. For example, if the LGD increases by 50%, the rating of Class A Notes would be expected to decrease to AA (sf) and the rating of the Class B Notes would be expected to decrease to A (low) (sf), all else being equal. If the PD increases by 50%, the rating of Class A Notes would be expected to decrease to AA (sf) and the rating of the Class B Notes would be expected to decrease to A (low) (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating of Class A Notes would be expected to decrease to A (sf) and the rating of the Class B Notes would be expected to decrease to BBB (low) (sf), all else being equal.

Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

Class B Notes risk sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (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.

Lead Analyst: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Senior Vice President
Initial Rating Date: 15 December 2014

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

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

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.