DBRS Confirms Ratings on Globaldrive Auto Receivables 2016-B B.V.

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by Globaldrive Auto Receivables 2016-B B.V. (the Issuer):

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

The rating actions on the Class A and Class B Notes (together, the Rated Notes) follow an annual review of the transaction and are based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of June 2017.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A and Class B Notes to cover the expected losses at the AAA (sf) and AA (high) (sf) rating levels, respectively.

The Issuer is a securitisation of German auto loans granted to retail and corporate customers originated and serviced by FCE Bank plc, German Branch (FCE Germany).

PORTFOLIO PERFORMANCE
As of June 2017, two- to three-month arrears were at 0.05% and the 90+ delinquency ratio was at 0.12%. The current cumulative net loss ratio was low at 0.06%.

PORTFOLIO ASSUMPTIONS
DBRS has conducted an analysis of the remaining collateral pool and decreased its cumulative net loss assumption to 0.73% from 0.79%. The main driver for the decreased loss assumption is the increased proportion of Trade Cycle Management (TCM) products in the remaining portfolio. TCM loans incorporate a balloon payment and have exhibited better historical performance than standard amortising loans.

CREDIT ENHANCEMENT
As of July 2017, credit enhancement to the Class A Notes increased to 9.65% from 8.00% at closing, and is provided by subordination of the Class B and C Notes. Class B credit enhancement has increased to 6.04% from 5.00%, and is provided by subordination of Class C.

The transaction benefits from a non-amortising liquidity reserve, currently at the target level of EUR 4.65 million. The liquidity reserve covers senior fees and interest on the Rated Notes.

Elavon Financial Services DAC, U.K. Branch (Elavon) is the account bank for the transaction. The DBRS private rating of Elavon 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. Crédit Agricole Corporate and Investment Bank (CA CIB) is the swap counterparty for the transaction. DBRS’s private rating of CA CIB is above the First Rating Threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating 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.

A review of the transaction legal documents was not conducted as the legal 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 this rating include monthly investor reports provided by FCE Germany.

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 these ratings 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 is the first rating action since the Initial Rating Date.

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.

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 with the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a lifetime base-case probability of default (PD) and loss given default (LGD) 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 PD and LGD of the current pool of loans for the Issuer are 1.46% and 50.00%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected 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 of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to AA (high) (sf).

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 (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf).

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in LGD, expected rating of AA (high) (sf).
-- 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in PD, expected rating of AA (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Authority 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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 6 September 2016

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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 Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Unified Interest Rate Model for European Securitisations
-- Derivative Criteria for European Structured Finance Transactions

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.