DBRS Confirms Ratings on Class A Notes of Secucor Finance 2013-I DAC

DBRS Ratings Limited (DBRS) has today confirmed its AA (sf) ratings on the Class A1 and Class A2 Notes (the Class A Notes and collectively with the Class B Variable Funding Note, the Notes) issued by Secucor Finance 2013-I DAC (the Issuer or Secucor) following an annual review of the transaction and the execution on 1 June 2017 of the following amendments:

-- The revolving period is extended to May 2021 from November 2018.
-- The coupon on the Notes has been changed from floating to fixed. The Class A Notes will pay a fixed rate of 0.72%, and the Class B Variable Funding Note will pay a fixed rate of 2.00%.
-- The weighted-average interest rate of additional FCC receivables that can be acquired from the Issuer during the revolving period has been lowered to 12% from 15%.
-- Conversion of Secucor Finance 2013-I, formerly registered as a Limited Company, under the Companies Act 2014 to a Designated Activity Company.

The rating confirmation is also based on the considerations listed below:
-- Portfolio performance, in terms of charge-off, payment and cash yield rate as of the May 2017 payment date.
-- Given the transaction is still in its revolving period, no early amortisation events have occurred.
-- The current available credit enhancement to the Class A Notes to cover expected losses assumed in line with the AA (sf) rating level.

Secucor is a securitisation of amortising consumer loans and store charge card credit facilities originated and serviced by Financiera El Corte Inglés E.F.C., S.A. (FECI), the captive finance company of the El Corte Inglés, S.A. distribution group.

PORTFOLIO PERFORMANCE
As of May 2017, the monthly principal payment rate was around 53.3%, the cash yield rate was around 17.9% and the charge-off rate was approximately 0.8%, slightly better compared with those as of October 2016. Delinquency rates have exhibited a downward trend over the year, with accounts 30 to 180 days in arrears at 0.5% of the performing receivables portfolio.

PORTFOLIO ASSUMPTIONS
The base case portfolio monthly payment rate and charge-off rates for TSC, TS9, FCC and FSC products of the current pool of receivables are 95.3%, 93.5%, 14.8%, 21.8% and 2.0%, 7.4%, 7.2% and 1.9%, respectively.

CREDIT ENHANCEMENT
The credit enhancement to the Class A Notes is provided by the subordination of the Class B Variable Funding Note, which depends on both the Yield Reserve and Dilution Reserve, the Class A Reserve Fund (currently at its target level of EUR 9 million) and Excess Spread. As of the May 2017 payment date, credit enhancement to the Class A Notes was at 10.88%, above the minimum value to be maintained of 8.26%.

BNP Paribas Securities Services S.A., Spanish Branch acts as Issuer Account Bank for this transaction. The DBRS private rating of BNP Paribas Securities Services S.A., Spanish Branch complies with the Minimum Institution Rating given the rating assigned to the Class A 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 applicable methodology to the rating is the 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. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

DBRS has conducted a review of the transaction amendments executed on 1 June 2017. A review of any other transaction 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 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 data and information used for these ratings include investor reports provided by Deutsche Bank AG, London Branch, servicer reports provided by FECI and additional information in the context of the aforementioned amendment provided by Santander Global Corporate Banking.

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

At the time of the initial rating DBRS was 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.

The last rating action on this transaction took place on 28 October 2016 when the rating of AA (sf) was confirmed on the Class A Notes.

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 to the parameters used to determine the rating (the Base Case):

-- DBRS expected the Base Case monthly payment rate and charge-off rate for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to Base Case assumptions and therefore have a negative effect on credit ratings.

-- The Base Case portfolio monthly payment rate and charge-off rates for TSC, TS9, FCC and FSC products of the current pool of receivables are 95.3%, 93.5%, 14.8%, 21.8% and 2.0%, 7.4%, 7.2% and 1.9%.

-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes if each variable (monthly payment rate and charge-off rate) was stressed over the base case assumption, while holding the other variables constant. For example, if the charge-off rate increases by 50%, the rating for the Class A Notes would be expected to drop to A (low) (sf), all else being equal. If the payment rate decreases by 50%, the rating for the Class A Notes would be expected to be at AA (sf), all else being equal.

-- While holding the Payment Rate constant, a hypothetical increase of the Base Case Charge-Off Rate by 25% would maintain the rating of the Class A Notes at AA (sf).
-- While holding the Payment Rate constant, a hypothetical increase of the Base Case Charge-Off Rate by 50% would maintain the rating of the Class A Notes at A (low) (sf).
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the Base Case Payment Rate by 25% would maintain the rating of the Class A Notes at AA (sf).
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the Base Case Payment Rate by 50% would maintain the rating of the Class A Notes at AA (sf).
-- A hypothetical decrease of the Base Case Payment Rate by 25% and a hypothetical increase of the Base Case Charge-Off Rate by 25%, ceteris paribus, would maintain the rating of the Class A Notes at AA (sf).
-- A hypothetical decrease of the Base Case Payment Rate by 25% and a hypothetical increase of the Base Case Charge-Off Rate by 50%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to BBB (sf).
-- A hypothetical decrease of the Base Case Payment Rate by 50% and a hypothetical increase of the Base Case Charge-Off Rate by 25%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to AA (low) (sf).
-- A hypothetical decrease of the Base Case Payment Rate by 50% and a hypothetical increase of the Base Case Charge-Off Rate by 50%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to BBB (low) (sf).

For further information on DBRS historic 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: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Chuck Weilamann, Managing Director
Initial Rating Date: 5 November 2013

DBRS Ratings Limited
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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.

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

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.