OREANDA-NEWS. Fitch Ratings says there is no impact on the ratings of two German auto ABS transactions that securitise loan/lease receivables originated by Banque PSA Finance, German branch (BPFG), from the transfer of origination and servicing tasks to PSA Bank Deutschland GmbH.

PSA Bank is a newly founded joint venture between Banque PSA Finance (BPF) and Santander Consumer Bank AG. The new entity received a commercial banking license from BaFin and has assumed all business from BPFG on the date of the business transfer, including the servicing of receivables securitised in two auto ABS transactions rated by Fitch. We have received confirmation from BPF that PSA Bank will apply identical servicing procedures as BPFG. Fitch also expects that the underwriting processes will remain unchanged after the transfer. We expect to conduct an on-site operational review at PSA Bank's premises relatively soon after the business transfer.

The transactions affected by the business transfer are Auto ABS German Loans Master (GLM; loan receivables), and Auto ABS FCT Compartiment 2013-1 (Auto 2013-1; leases). Auto 2013-1 is a term securitisation and has entered amortisation. GLM is a master structure with an initial revolving period of two years, which was extended by four years on 30 November 2015. As such, servicing in the two deals will be conducted by PSA Bank, while only GLM will purchase new loan receivables to be originated by PSA Bank.

The business transfer has legal implications for the transactions. BPF is a French bank and various aspects of French law also applied to its German branch BPFG. However, PSA Bank is an entity under German law. Both transactions feature so called specially dedicated accounts (SDA) under French law, on which regular monthly instalments from customers are collected. The accounts are solely created for the benefit of each transaction, and Fitch understands from transaction counsel that, under French law, creditors of a French servicer could not claim on the amounts in the SDA in case of servicer insolvency.

As per counsel's guidance, after the transfer and the application of German law, the protection for the SDAs will no longer apply. Consequently, collections in the SDA could fall into PSA Bank's insolvency estate and could be lost if the servicer defaults. The transactions have commingling reserves, which are funded at their respective target amounts to cover expected collections that are not paid into the SDA (ie prepayments and balloon instalments or residual value selling proceeds). Fitch assessed the transactions' ability to withstand commingling losses upon an insolvency of PSA Bank, taking into consideration the available commingling reserves and the transactions' credit enhancement (CE) for the rated class A notes. In our view, the reserve together with the CE is adequate in both deals to absorb commingling losses.

For Auto 2013-1, which securitises lease receivables, in case of insolvency of PSA Bank, regular lease instalments are at risk of falling into the servicer's insolvency estate. However, Fitch understands from transaction counsel that residual value selling proceeds will be segregated from the estate and hence, would be available to Auto 2013-1 even after servicer insolvency. We approached the risk of a loss of regular lease instalments in our analysis by considering only residual values as available collateral for the redemption of the class A notes. In Fitch's view, the residual values under application of conservative 'AAAsf' market value declines are sufficient to ensure the full repayment of the rated notes.

We assessed the available liquidity reserves in the transactions for their coverage of transaction senior expenses and class A interest. Both transactions benefit from very strong liquidity in excess of six months of expenses, even under the application of Fitch's stressed servicing fee assumptions. We thus consider the risk of non-payment of interest on the transactions' class A notes to be remote, even if PSA Bank defaults.