DBRS Finalises Provisional Ratings Assigned to Bumper 8 (UK) Finance PLC

DBRS Ratings Limited (DBRS) has today finalised provisional ratings assigned to the Notes issued by Bumper 8 (UK) Finance PLC (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (high) (sf)

The Notes are backed by receivables and residual value claims (RV Claims) related to auto lease agreements granted by LeasePlan UK Limited (LPUK) to corporate, small- and medium-sized enterprises (SME), retail and public-sector clients in England and Wales (Scottish and Northern Irish lessees are excluded). The underlying receivables represent the right to receive payment of regular lease instalments and the RV Claims, where applicable, are linked to the rights to receive all proceeds from the sale of the underlying vehicles.

Proceeds from the subscription of the Notes finance the purchase of the initial portfolio from LPUK as the Seller and LeasePlan Corporation N.V. as the Reserve Loan Provider grants the Issuer a loan that funds the Liquidity Reserve, the Set-Off Reserve, the Commingling Reserve and the Maintenance Reserve. The receivables are serviced by LPUK (the Servicer).

The transaction benefits from a one-year revolving period, during which the Seller may offer additional receivables and their related RV Claims that the Issuer will purchase subject to eligibility criteria, concentration limits, performance triggers and other conditions set out in the transaction documents.

The ratings are based on DBRS’s review of the following analytical considerations:
-- The transaction capital structure and the form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support the expected cumulative net loss and residual value loss assumptions under various stress scenarios at a AAA (sf) standard for the Class A Notes and an AA (high) (sf) scenario for the Class B Notes.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and LPUK’s ability to perform collection activities on the collateral.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction was modelled in Intex DealMaker.

Notes:
All figures are in GBP unless otherwise noted.

The principal methodology applicable to the rating is “Rating European Consumer and Commercial Asset-Backed Securitisations”.

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. Due to the inclusion of a revolving period in the transaction, the analysis is based on the worst-case replenishment criteria set forth in the transaction legal documents.

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 data and information used for this rating include:
-- Static origination, default and recovery data on a monthly basis from November 2009 to October 2016. Default data was provided separately for corporate and SME/retail lease agreements
-- Dynamic portfolio-level monthly delinquency data from November 2009 to October 2016
-- Summarised stratification tables as at October and December 2016
-- Lease-level data detailing vehicle realisation proceeds from November 2009 to October 2016
-- A theoretical amortisation schedule of the selected pool

All information used for this rating was sourced by LPUK directly or indirectly through the transaction arrangers LeasePlan Corp N.V.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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):

-- Probability of Default Rates Used: Base Case PD of 3.1%, a 25% and 50% increase on the base case PD.
-- Recovery Rates Used: Base case Recovery Rate of 45% at the AAA (sf) stress level, and 47% at the AA (high) stress level.
-- Loss Given Default Rates Used: Base Case LGD of 55% at the AAA (sf) stress level, and 53% at the AA (high) stress level. A 25% and 50% increase in the Base Case LGD. Note that the percentage increases in the LGD Rates are assumed for the other stress LGD Rate levels.
-- Residual Value (RV) Loss: Base Case RV Rate of 40% at the AAA (sf) stress level, and 38% at the AA (high) stress level. Both scenarios have a 25% and 50% increase in RV Loss.

DBRS concludes that for the Class A Notes:

-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (sf).
-- A hypothetical increase of the base case RV loss by 25%, ceteris paribus, would not lead to a downgrade of the Class A Notes.
-- A hypothetical increase of the base case RV loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (sf).
-- A hypothetical increase of the base case RV loss by 25%, and a hypothetical increase in the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base case RV loss by 25%, and a hypothetical increase in the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (low) (sf).
-- A hypothetical increase of the base case RV loss by 50%, and a hypothetical increase in the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (low) (sf).
-- A hypothetical increase of the base case RV loss by 50%, and a hypothetical increase in the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (high) (sf).

DBRS concludes that for the Class B Notes:

-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to AA (sf).
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to AA (low) (sf).
-- A hypothetical increase of the base case RV loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to AA (low) (sf).
-- A hypothetical increase of the base case RV loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to AA (low) (sf).
-- A hypothetical increase of the base case RV loss by 25%, and a hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to AA (low) (sf).
-- A hypothetical increase of the base case RV loss by 25%, and a hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (high) (sf).
-- A hypothetical increase of the base case RV loss by 50%, and a hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (high) (sf).
-- A hypothetical increase of the base case RV loss by 50%, and a hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (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: Alex Garrod: Senior Vice President - EU ABS, Global Structured Finance
Rating Committee Chair: Christian Aufsatz: Managing Director - Head of European Structured Finance Ratings
Initial Rating Date: 24 January 2017

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

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

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Unified Interest Rate Model for European Securitisations
-- Rating CLOs Backed by Loans to European SMEs

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