DBRS Assigns Ratings to SC Germany Consumer 2018-1 UG

DBRS Ratings Limited (DBRS) assigned ratings to the Class A, Class B, Class C and Class D Notes (collectively with the unrated Class E Notes and Class F Notes, the Notes) issued by SC Germany Consumer 2018-1 UG (the Issuer) as follows:

-- AA (low) (sf) to the Class A Notes
-- A (sf) to the Class B Notes
-- BBB (sf) to the Class C Notes
-- BB (high) (sf) to the Class D Notes

The rating of the Class A Notes addresses the timely payment of interest and ultimate repayment of principal by the legal final maturity date. The ratings of the Class B, Class C and Class D Notes address the ultimate payment of interest and ultimate repayment of principal by the legal final maturity date.

The Notes are backed by a revolving pool of receivables from general purpose consumer loans granted to individuals residing in Germany and are originated and serviced by Santander Consumer Bank AG (SCB), which is owned by Santander Consumer Finance S.A.

The ratings are based on the considerations listed below:
-- The transaction capital structure including the form and sufficiency of available credit enhancement.
-- The ability of the transaction’s structure and triggers to withstand stressed cash flow assumptions and repay the Notes according to the terms of the transaction documents.
-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and diversification of the collateral and historical and projected performance of SCB’s portfolio.
-- The sovereign rating of the Federal Republic of Germany, currently rated AAA with a Stable trend by DBRS.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions that address the true sale of the assets to the Issuer.

The transaction cash flow structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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.

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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/333487/rating-sovereign-governments.

The sources of information used for these ratings include performance and portfolio data relating to the loans originated by SCB. DBRS, through the Arranger, Banco Santander, S.A., received historical default and recovery data by monthly and quarterly vintages on a cumulative basis from January 2007 to August 2018 and September 2018, respectively. Data was also provided relating to dynamic prepayments from January 2007 to September 2018. In addition, DBRS received stratification tables related to the collateral portfolio that allowed DBRS to further assess the portfolio.

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

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.

These ratings concern newly issued financial instruments. These are the first DBRS ratings on these financial instruments.

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

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating:

-- Expected Default of 6.2%, a 25% and 50% increase.
-- Expected Loss Given Default (LGD) of 80%, a 25% and 50% increase.

Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected default and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected default and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected default and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected default and 50% increase in the expected LGD.

DBRS concludes that the expected ratings under the eight stress scenarios are:
-- Class A Notes: A (sf), BBB (high) (sf), A (sf), BBB (high) (sf), BBB (sf), A (sf), BBB (high) (sf), BBB (sf).
-- Class B Notes: BBB (high) (sf), BBB (low) (sf), BBB (high) (sf), BBB (low) (sf), BB (sf), BBB (high) (sf), BBB (low) (sf), BB (sf).
-- Class C Notes: BB (high) (sf), BB (low) (sf), BB (high) (sf), BB (low) (sf), B (low) (sf), BB (high) (sf), BB (low) (sf), B (low) (sf).
-- Class D Notes: BB (sf), B (sf), BB (sf), B (sf), below B (low) (sf), BB (sf), B (sf), below B (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 and US regulations only.

Lead Analyst: Jeffrey Cespon, Financial Analyst, European ABS, Global Structured Finance
Rating Committee Chair: Christian Aufsatz, Managing Director, Global Structured Finance
Initial Rating Date: 21 December 2018

DBRS Ratings Limited
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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.