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Rating Action:

Moody's assigns definitive ratings to Auto ABS notes issued by Turbo Finance plc

Global Credit Research - 01 Feb 2011

Approximately GBP 300 Million of UK Auto ABS Notes rated

London, 01 February 2011 -- Moody's Investors Service has assigned the following definitive ratings to notes issued by Turbo Finance plc (the "Issuer"):

- Aaa (sf) to the GBP 246.20 million Class A Notes due January 2019

- Aa3 (sf) to the GBP 54.20 million Class B Notes due January 2019

Moody's has not assigned ratings to the subordinated GBP 34.28 million Class C Notes and GBP 5.46 million Class D Notes. The proceeds of the Class D Notes will be applied to fund the reserve fund in the transaction.

RATINGS RATIONALE

The transaction is a static cash securitisation of auto leases extended to obligors in United Kingdom by Carlyle Finance, a division of FirstRand Bank Limited, London Branch (A3/P-1/C-, stable outlook) ("FRB London"). This is the first public securitisation transaction in the United Kingdom sponsored by FRB London. The originator will also act as the servicer of the portfolio during the life of the transaction.

The portfolio of underlying assets consists of hire purchase leases granted to individuals and companies resident in the United Kingdom to finance the purchase of new and used vehicles. The portfolio comprises amortising loans whereby the underlying obligor is required to pay a monthly instalment during the term of the underlying contract. Certain leases in the portfolio are also exposed to balloon payments, although the balloon portion is very limited in the portfolio. As of 31 December 2010, the portfolio consists of approximately 63,541 lessees. The loans were originated between 2005 and 2010, with a weighted average seasoning of 12 months and a weighted average remaining term of 37 months.

According to Moody's, the transaction benefits from credit strengths such as a granular portfolio, relatively simple waterfall and a 1.63% reserve fund which is fully funded at closing and is available to cover any liquidity shortfalls throughout the life of the transaction and credit enhancement at the end. In addition, the transaction benefits from back-up servicing arrangements which, in Moody's opinion, significantly reduces the linkage of the transaction to FRB London as servicer. In addition, Finsolutia Consultoria e Gestao de Creditos S.A. will be appointed as standby-servicer facilitator at closing of the transaction to facilitate the appointment of a standby-servicer following the downgrade of FRB London below Baa3.

On the other hand, as with all auto lease transactions in the UK, the portfolio is exposed to the risk of voluntary termination ("VT") by the obligor if the obligor has made payments equal to at least one half of the total amount which would have been payable under the contract and returns the vehicle to the lessor. Moody's did not receive gross VT default data from the originator, but only net VT default data (i.e. with recoveries included). In addition, Moody's did not receive static recovery but only dynamic recovery data for the entire portfolio. These aspects were factored in Moody's overall analysis and in the V-score below.

Moody's analysis focused, among other factors, on (i) an evaluation of the underlying portfolio of loans; (ii) historical performance information; (iii) 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 reserve fund; (vi) the back-up servicing arrangement of the transaction; (viii) the independent cash manager and back-up calculation agent and (viii) the legal and structural integrity of the transaction.

Moody's assumed a gross loss rate of 5.5% for the entire pool, which takes into account both defaults arising from normal defaults by the obligors and losses arising from the exercise of the obligor of . A coefficient of variation of 50% is used as the other main input for Moody's cash flow model ABSROM. Whilst the historical default rate for older vintages showed default rates higher than the assumed gross loss level, Moody's has given benefit to the lower default rate observed in more recent vintages as a result of updated underwriting methods used by the originator. Commingling risk and set-off risk is assessed to be commensurate with the ratings assigned on the Notes.

The V-score analysis for the transaction is Medium. Due to a lack of the UK auto lease sector V-score, Moody's has compared the transaction v-score with the German auto lease sector scores. The main contribution to an overall Medium V-score assessment for the transaction is from the assessment on the quality of historical data received from the transaction parties. In addition, Moody's has observed significant variability in the performance of different origination vintages. For more information, the V-Score has been assigned accordingly to the report "V Scores and Parameter Sensitivities in the Non-U.S. Vehicles ABS Sector", published in January 2009.

The principal methodologies used in this rating were Moody's Approach to Rating European Auto ABS: More Rubber Set to Hit European Roads, published in November 2002 and The Lognormal Method Applied to ABS Analysis, published in July 2000.

In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

Moody's Investors Service received and took into account a third party due diligence report on the underlying assets or financial instruments in this transaction and the due diligence report had a neutral impact on the rating.

The ratings address 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 and ultimate payment of interest and principal with respect to the B Notes by the legal final maturity. 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.

The note amounts have changed since the publishing of provisional ratings on 25 November 2010 due primarily to the definitive portfolio amount, but remain in line with the percentages of portfolio and credit enhancement.

Moody's used its excel based cash-flow model Moody's ABSROM™ as part of its quantitative analysis of the transaction. Moody's ABSROM™ model enables users to model various features of a standard European ABS transaction -- including the specifics of the default distribution of the assets, their portfolio amortisation profile, yield, as well as the specific priority of payments, swaps and reserve funds on the liability side of the ABS structure. Moody's ABSROM™ User Guide, available on Moody's website, covers the functionality of the model and provides a comprehensive index of the user inputs and outputs.

In rating auto ABS, loss rate and co-efficient of variation are two key inputs that determine the lognormal distribution. Parameter sensitivities for this transaction have been tested in the following manner: Moody's tested nine scenarios derived from the combination of mean loss: 5.50% (base case), 6.50% (base case +0.50%), 7.50% (base case +1.0%) and recoveries: 35% (base case), 30% (base case -5%), 25% (base case -10%). The model output results for Class A under these scenarios vary from Aaa (base case) to Aa2 (2 notches where the loss rate is 7.50% and the recovery is 25%). The Class B output results under these scenarios vary from Aa3 to Baa2 (5 notches where the loss rate is 7.50% and the recovery is 25%). 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.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

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
Ning Loh
Vice President - Senior 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
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United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's assigns definitive ratings to Auto ABS notes issued by Turbo Finance plc
No Related Data.
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