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Related Issuers
Rating Action:

Moody's assigns definitive ratings to Auto ABS issued by Motor 2011 PLC

Global Credit Research - 21 Apr 2011

Approximately GBP 979,846,000 of UK auto ABS notes rated

London, 21 April 2011 -- Moody's Investors Service has assigned the following definitive rating to notes issued by Motor 2011 PLC (the "Issuer"):

- Aaa (sf) to the GBP 499,846,000 Class A1 Notes due March 2019

- Aaa (sf) to the GBP 480,000,000 Class A2 Notes due March 2019

Moody's has not assigned ratings to the subordinated GBP 304,356,426 Class B Notes.

RATINGS RATIONALE

The transaction is a static cash securitisation of agreements entered into for the purpose of financing vehicles to obligors in the United Kingdom by Santander Consumer (UK) plc (NR)("SC UK"), a wholly owned subsidiary of Santander UK PLC (Aa3/P-1/C-, negative outlook) ("Santander UK"). This is the first public securitisation transaction in the United Kingdom sponsored by SC UK. The originator will also act as the servicer of the portfolio during the life of the transaction.

The portfolio of underlying assets consists of GBP 1,284,202,426 conditional sale, fixed-sum loan and personal contract purchase ("PCP") agreements granted to individuals resident in the United Kingdom to finance the purchase of new and used vehicles. Conditional sale and PCP agreements are both forms of secured financing. In the case of PCP agreements, the borrower can either pay an optional balloon payment at contract maturity or return the vehicle to the lender with no further obligation. This final optional payment is not being included in the transaction. A fixed-sum loan agreement is a fully amortising unsecured loan. As of 31 Dec 2010, the portfolio consisted of 257,811 agreements originated between 2006 and 2010, with a weighted average seasoning of 11 months and a weighted average remaining term of 37 months. Conditional sale agreements comprise the majority of the portfolio, making up 54% weighted by outstanding balance. Meanwhile fixed-sum loan and PCP agreements make up 39% and 7% of the portfolio respectively.

Moody's analysis focused, among other factors, on (i) an evaluation of the underlying portfolio of loans; (ii) the macroeconomic environment; (iii) historical performance information; (iv) the credit enhancement provided by subordination, by the excess spread and the reserve fund; (v) the liquidity support available in the transaction, by way of principal to pay interest and the liquidity facility; (vi) the back-up servicing arrangement of the transaction; (vii) the roles of the swap provider and (viii) the legal and structural integrity of the transaction.

According to Moody's, the transaction benefits from credit strengths such as a granular portfolio, a static and relatively simple transaction structure and a 3.0% reserve fund which may amortise after the transaction has paid down by 50%, subject to certain performance criteria. This reserve is fully funded at closing by a subordinated loan provided by SC UK. The reserve fund is available for use as credit enhancement for the Class A1 notes and Class A2 notes (together, the Class A notes) throughout the life of the transaction. A non-amortising liquidity facility equal in size to 4% of the Class A notes will be provided by Santander UK.. The issuer may draw on this facility to pay senior expenses and Class A interest in the event of a cashflow disruption. In addition, the transaction benefits from Banco Santander S.A. (Aa2/P-1/B-) acting as back-up servicer facilitator.

A key risk common to auto ABS transactions in the UK and present in this transaction is the possibility the obligor may exercise the right of Voluntary Termination as per the Consumer Credit Act. The potential for additional loss due to this risk has been incorporated into Moody's quantitative analysis. In addition, the transaction may be exposed to commingling and account bank risk which is mitigated by a daily sweep of collections and the inclusion of a seller account declaration of trust. These aspects were factored into Moody's overall analysis.

The V-score analysis for the transaction is Low/Medium. Moody's has compared the transaction V-score with the EMEA German auto lease sector benchmark which is the current benchmark for EMEA auto lease transactions. Moody's notes that the Quality of Historical Data for the Issuer/Sponsor/Originator and Issuer/Sponsor/Originator's Historical Performance Variability are both Medium. SC UK provided historical default, VT and recovery information from 2006 to 2010, although for a more limited time frame in the specific case of PCP agreements. For more information, the V-Score has been assigned in accordance to the report "V Scores and Parameter Sensitivities in the Non-U.S. Vehicles ABS Sector", published in January 2009.

The principal methodology used in this rating was Moody's Approach to Rating European Auto ABS: More Rubber Set to Hit European Roads, published in November 2002.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments in this transaction.

The rating addresses the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal on the Class A notes. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

Moody's assumed a gross default rate of 7.0% for the entire pool, which takes into account both normal defaults by the obligors and voluntary terminations. A coefficient of variation of 45% has been used as the other main input for Moody's cash flow model, ABSROM™. Moody's has stressed the results obtained from the historical data analysis in part to account for the limited historical data available for PCP agreements originated by SC UK.

In rating auto ABS, the default rate and recovery rate are two key inputs into Moody's cash-flow model. Parameter sensitivities for this transaction have been tested in the following manner: Moody's tested nine scenarios derived from the combination of mean default: 7% (base case), 8% (base case +1%), 9% (base case +2%) and recoveries: 25% (base case), 20% (base case -5%), 15% (base case -10%). The model output results for Class A under these scenarios vary from Aaa (base case) to Aa2 (2 notches where the default rate is 9% and the recovery is 15%). Parameter Sensitivities provide a quantitative/model-indicated calculation of the number of notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather, how the initial model output of the security might have differed if the two parameters within a given sector that have the greatest rating impact were varied.

REGULATORY DISCLOSURES

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information and confidential and proprietary Moody's Investors Service information.

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Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

London
Steven Bild
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Milan
Alex Cataldo
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's assigns definitive ratings to Auto ABS issued by Motor 2011 PLC
No Related Data.
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