CARS 2018-1:
Class A Notes confirmed at
CARS 2019-1:
Class A Notes confirmed at
Class
The ratings address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity dates in
The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
Portfolio performance, in terms of delinquencies, defaults, and losses as of the
Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels;
Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.
CARS 2018-1 and CARS 2019-1 are securitisations of auto loan receivables related to hire purchase and personal contract purchase (PCP) agreements for new and used vehicles granted by
CARS 2018-1 closed in
PORTFOLIO PERFORMANCE
CARS 2018-1: As of the
CARS 2019-1: As of the
PORTFOLIO ASSUMPTIONS AND
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pools of receivables and updated its base case PD and LGD assumptions as follows:
For CARS 2018-1, the base case PD and LGD assumptions were updated to 6.5% and 33.9%, respectively.
For CARS 2019-1, the base case PD and LGD assumptions were updated to 6.5% and 24.2%, respectively.
The transaction is subject to VT risk, as under the
CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes. The transactions continue to deleverage steadily, resulting in increased credit enhancement available to the rated notes.
As of the
As of the
The transactions benefit from liquidity support provided by cash reserves funded at closing through subordinated loans granted by Black Horse. The reserves are nonamortising and were funded to an amount equal to 1.5% of the respective initial portfolio balance -
CARS 2019-1 additionally benefits from an RV Top-Up reserve fund, funded at closing to
The transaction structures were analysed in Intex DealMaker.
The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may increase in the coming months for many ABS transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For these transactions, DBRS Morningstar applied an additional haircut to its base case recovery rates. The transactions do not contain any receivables benefitting from COVID-19 related payment holidays, as any such loans are considered non-permitted variations and are repurchased from the transactions by the seller.
On
On
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
Notes:
All figures are in British pound sterling unless otherwise noted.
The principal methodology applicable to the ratings is the 'Master European Structured Finance Surveillance Methodology' (
A review of the transactions' legal documents was not conducted as the legal documents have remained unchanged since the most recent rating actions.
Other methodologies referenced in these transactions are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.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 Morningstar Credit Ratings' of the 'Global Methodology for Rating Sovereign Governments' at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include investor reports and loan-level data provided by
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial ratings, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on CARS 2018-1 took place on
The last rating action on CARS 2019-1 took place on
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies is available at www.dbrsmorningstar.com.
To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (the base case):
DBRS Morningstar expected a lifetime base case PD, LGD, and RV haircut for the pools 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.
CARS 2018-1: the base case PD and LGD of the current pool of loans are 6.5% and 33.9%, respectively. The RV haircut is 41.2% at the
CARS 2019-1: the base case PD and LGD of the current pool of loans are 6.5% and 24.2%, respectively. The RV haircuts are 45.2% and 34.5% at the
The risk sensitivity overview below illustrates the ratings expected if the PD, LGD, and the RV haircut increase by a certain percentage over the base case assumption. For example, if both the PD and LGD increase by 50%, the rating on the CARS 2018-1 Class A Notes would be expected to decrease to AA (sf), ceteris paribus. If the RV haircut increases by 50%, the rating on the CARS 2018-1 Class A Notes would be expected to remain at
CARS 2018-1 Class A Notes Risk Sensitivity:
25% increase in PD and LGD, expected rating of
50% increase in PD and LGD, expected rating of AA (sf)
25% increase in RV haircut, expected rating of
50% increase in RV haircut, expected rating of
25% increase in PD and LGD and 25% increase in RV haircut, expected rating of
25% increase in PD and LGD and 50% increase in RV haircut, expected rating of AA (high) (sf)
50% increase in PD and LGD and 25% increase in RV haircut, expected rating of AA (sf)
50% increase in PD and LGD and 50% increase in RV haircut, expected rating of AA (sf)
CARS 2019-1 Class A Notes Risk Sensitivity:
25% increase in PD and LGD, expected rating of AA (high) (sf)
50% increase in PD and LGD, expected rating of AA (sf)
25% increase in RV haircut, expected rating of
50% increase in RV haircut, expected rating of AA (high) (sf)
25% increase in PD and LGD and 25% increase in RV haircut, expected rating of AA (sf)
25% increase in PD and LGD and 50% increase in RV haircut, expected rating of AA (sf)
50% increase in PD and LGD and 25% increase in RV haircut, expected rating of AA (low) (sf)
50% increase in PD and LGD and 50% increase in RV haircut, expected rating of A (high) (sf)
CARS 2019-1 Class B Notes Risk Sensitivity:
25% increase in PD and LGD, expected rating of A (sf)
50% increase in PD and LGD, expected rating of A (low) (sf)
25% increase in RV haircut, expected rating of A (high) (sf)
50% increase in RV haircut, expected rating of A (low) (sf)
25% increase in PD and LGD and 25% increase in RV haircut, expected rating of A (low) (sf)
25% increase in PD and LGD and 50% increase in RV haircut, expected rating of BBB (high) (sf)
50% increase in PD and LGD and 25% increase in RV haircut, expected rating of BBB (high) (sf)
50% increase in PD and LGD and 50% increase in RV haircut, expected rating of BBB (sf)
For further information on DBRS Morningstar historical default rates published by the
https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by
Lead Analyst:
Rating Committee Chair:
Initial Rating Date:
Tel. +44 (0) 20 7855 6600
Registered and incorporated under the laws of
The rating methodologies used in the analysis of these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.
Master European Structured Finance Surveillance Methodology (22 April 2020),
https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology.
Rating European Structured Finance Transactions Methodology (21 July 2020),
https://www.dbrsmorningstar.com/research/364305/rating-european-structured-finance-transactions-methodology.
Rating European Consumer and Commercial Asset-Backed Securities (
Legal Criteria for European Structured Finance Transactions (11 September 2019),
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions.
Operational Risk Assessment for European Structured Finance Originators (
Operational Risk Assessment for European Structured Finance Servicers (
Interest Rate Stresses for European Structured Finance Transactions (
Derivative Criteria for European Structured Finance Transactions (
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.
For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
Ratings
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-Participating
27-Nov-20 Class A Notes ConfirmedAAA (sf) -- EU
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-Participating
27-Nov-20 Class A Notes ConfirmedAAA (sf) -- EU
27-Nov-20 ClassB Notes Upgraded AA (low) (sf) -- EU
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