Rating Raised On Motor 2015-1#s Class B Auto ABS Notes Following Class A2 Rating Affirmed

Stocks and Financial Services Press Releases Wednesday March 14, 2018 17:54
MILAN--14 Mar--S&P Global Ratings

MILAN (S&P Global Ratings) March 14, 2018--S&P Global Ratings today raised to 'AAA (sf)' from 'AA- (sf)' its credit rating on Motor 2015-1 PLC's class B notes. At the same time, we have affirmed our 'AAA (sf)' rating on the class A2 notes (see list below).

Today's rating actions follow our review of the transaction's performance, based on the most recent information that we have received (as of the January 2018 interest payment date).

Given that the transaction has been amortizing since April 2016 and paying sequentially, the hard credit enhancement available for the class A2 notes increased to 99.2% on the January 2018 interest payment date, from 21.0% at closing in March 2015 (see "New Issue: Motor 2015-1 PLC," published on March 2, 2015). The hard credit enhancement for the class B notes increased to 50.9% from 11.5% over the same period.

In our base-case scenario, we forecast that the U.K. will record GDP growth of 1.0% in 2018 and 1.3% in 2019. At the same time, we estimate an unemployment rate of 4.5% in 2018, increasing further to 4.7% and 4.8% in 2019 and 2020. Although we believe that the strong U.K. auto securitization performance witnessed to date may begin to weaken, we expect the transaction to be less affected due to its short remaining life.

We have analyzed credit risk under our European auto asset-backed securities (ABS) criteria for the auto loans and our consumer credit criteria for direct residual value risk linked to personal contract purchase (PCP) contracts and the portion of personal loans, using the transaction's historical gross and net loss data and the performance data we received at closing (see "Methodology And Assumptions For European Auto ABS," published on Oct. 15, 2015, and "Global Methodology And Assumptions For Assessing The Credit Quality Of Securitized Consumer Receivables," published on Oct. 9, 2014). The data show that the hostile terminations experienced since the beginning of the amortization period are lower than our expectations at closing, while voluntary terminations are higher. We have therefore lowered our gross loss base-case assumptions on hostile terminations to 2.30% from 3.20% at closing, leaving the 4.75x multiple at the 'AAA' level unchanged. On the other hand, we have increased the gross loss voluntary terminations base-case assumptions to 1.15% from 0.44%, leaving the 2x multiple at 'AAA' level unchanged.

We applied a stressed recovery assumption of 26.7% at the 'AAA' rating scenario. We have also updated our market value decline risk assessment for conditional sale contract (CSC) loans that contain a balloon payment (where the last installment is larger than the previous equal installments), assuming 6.5% of additional losses on balloon payments at the 'AAA' rating level, in line with our European auto ABS criteria. We have also updated our residual value loss rate assumption related to the last balloon payment of PCP agreements to 20.5%, slightly lower than the 21.2% used at closing.

The notes securitize a portfolio of auto loan receivables, originated by Santander Consumer (UK). All of the loans are fully amortizing, and currently 53.7% of the pool comprises CSC loans that have balloon payments and 23.5% PCP agreement with guaranteed future value payments. The share of the CSC balloon payments is 3.88% of the total portfolio, while the guaranteed future value payments are 22.51%.

Our analysis indicates that the available credit enhancement for the class A2 notes is sufficient to withstand the credit and cash flow stresses that we apply at the assigned rating. Consequently, we have affirmed our 'AAA (sf)' rating on this class of notes.

Our analysis also indicates that the available credit enhancement for the class B notes is commensurate with a higher rating than that currently assigned. We have therefore raised to 'AAA (sf)' from 'AA- (sf)' our rating on this class of notes.


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