EUR 466.2 million ABS Notes rated, relating to a portfolio of German auto loans
Madrid, January 29, 2021 -- Moody's Investors Service ("Moody's") has assigned the following rating
to Notes issued by PBD GERMANY AUTO LOAN 2021 UG (HAFTUNGSBESCHRAENKT):
....EUR 466.2M Class A Fixed Rate Notes
due December 2032, Definitive Rating Assigned Aa2 (sf)
Moody's has not assigned a rating to the subordinated EUR 33.8M
Class B Fixed Rate Notes due December 2032.
At closing EUR 466.2M Class A Fixed Rate Notes and EUR 33.8M
Class B Fixed Rate Notes are issued. During the three years revolving/ramp-up
period additional Class A and Class B Notes can be issued up to a total
outstanding balance of EUR 800.0M Class A Notes and EUR 58.0M
Class B Notes to purchase additional consumer loans. Issuance of
new notes will not reduce credit enhancement levels.
RATINGS RATIONALE
The Notes are backed by a pool of German auto loans originated by PSA
Bank Deutschland GmbH ("PSA Bank", NR, a joint
venture between Banque PSA Finance (A3/P-2 Bank deposit rating;
A3(cr)/P-2(cr)) and Santander Consumer Bank AG (A3/P-2 Bank
deposit rating; A1(cr)/P-1(cr)).
The portfolio of assets amount to approximately EUR 500.0M as of
20th January 2021 pool cut-off date. Subject to certain
conditions, the portfolio can ramp up to EUR 858.0M during
the three years revolving period. The General Reserve Fund will
be funded to 0.3% of the Class A Notes balance at closing
and the total credit enhancement for the Class A Notes will be 7.04%.
The rating is primarily based on the credit quality of the portfolio,
the structural features of the transaction and its legal integrity.
According to Moody's, the transaction benefits from various credit
strengths such as a granular portfolio and an amortising liquidity reserve
sized at 0.3% of Class A Notes balance. However,
Moody's notes that the transaction features some credit weaknesses such
as the three years revolving/ramp-up period and the high share
of balloon loans. Various mitigants have been included in the transaction
structure such as a back-up servicer facilitator which is obliged
to appoint a back-up servicer upon servicer insolvency, as
well as early amortization triggers which will start notes' amortisation
before the revolving/ramp-up period end date if performance deteriorates.
The portfolio of underlying assets was distributed through dealers to
private individuals (59.5%) and commercial borrowers (40.5%)
to finance the purchase of new (67.6%) and used (32.4%)
cars. As of 20th January 2021 the portfolio consists of 41,034
auto finance contracts with a weighted average seasoning of 13.0
months. The contracts have equal instalments during the life of
the contract and a larger balloon payment at maturity. Balloon
loans represent 72.6% of the portfolio at closing and on
average, the balloon instalment portion accounts for 33.7%
of the initial principal outstanding balance of balloon loans.
Moody's determined the portfolio lifetime expected defaults of 4.75%,
expected recoveries of 45.0% and Aaa portfolio credit enhancement
("PCE") of 12.5% related to borrower receivables.
The expected defaults and recoveries capture our expectations of performance
considering the current economic outlook, while the PCE captures
the loss we expect the portfolio to suffer in the event of a severe recession
scenario. Expected defaults and PCE are parameters used by Moody's
to calibrate its lognormal portfolio loss distribution curve and to associate
a probability with each potential future loss scenario in the cash flow
model to rate Auto ABS.
Portfolio expected defaults of 4.75% are slightly higher
than the EMEA Auto ABS average and are based on Moody's assessment of
the lifetime expectation for the pool taking into account (i) historic
performance of the book of the originator, (ii) benchmark transactions,
and (iii) other qualitative considerations, such as the high balloon
component of the portfolio.
Portfolio expected recoveries of 45.0% are in line with
the EMEA Auto ABS average and are based on Moody's assessment of the lifetime
expectation for the pool taking into account (i) historic performance
of the originator's book, (ii) benchmark transactions,
and (iii) other qualitative considerations.
PCE of 12.5% is slightly higher than the EMEA Auto ABS average
and is based on Moody's assessment of the pool which is mainly driven
by: (i) the exposure to balloon payments after considering the strength
of the manufacturer, (ii) the relative ranking to originator peers
in the EMEA market, and (iii) the three years revolving period.
The PCE level of 12.5% results in an implied coefficient
of variation ("CoV") of 44.4%.
CURRENT ECONOMIC UNCERTAINTY:
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of consumer assets from the
current weak German economic activity and a gradual recovery for the coming
months. Although an economic recovery is underway, it is
tenuous and its continuation will be closely tied to containment of the
virus. As a result, the degree of uncertainty around our
forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
The principal methodology used in this rating was "Moody's Global Approach
to Rating Auto Loan- and Lease-Backed ABS" published in
December 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1202515.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
Factors that may cause an upgrade of the rating of the notes include significantly
better than expected performance of the pool together with an increase
in credit enhancement of Notes.
Factors that would lead to a downgrade of the rating include: (i)
increased counterparty risk leading to potential operational risk of servicing
or cash management interruptions; and (ii) economic conditions being
worse than forecast resulting in higher arrears and losses.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
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and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
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Paula Couce Iglesias
Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Armin Krapf
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
