OREANDA-NEWS. Fitch Ratings has assigned Auto ABS Spanish Loans 2016, FT's classes A and B expected ratings as follows:

Class A: 'AA+(EXP)sf'; Outlook Stable

Class B: 'A-(EXP)sf'; Outlook Stable

Class C: not rated

Class D: not rated

This transaction is an 18-month revolving securitisation of Spanish car acquisition loans. All loans are originated and serviced by PSA Financial Services Spain, E. F.C, S. A (PSA Financial), a 50/50 joint venture of Banque PSA Finance S. A. (BPF) and Santander Consumer Finance Spain (SCF, A-/Stable/F2). PSA Financial is the Spanish financial captive of the French car manufacturer Peugeot S. A. (BB+/Positive).

The assignment of the final ratings is contingent on the receipt of final documents conforming to information already received.


Strong Asset Performance Expectations

Fitch estimates a blended 2.6% base case lifetime default rate on the collateral, expressed as a percentage of the initial collateral's euro balance. The agency also estimates a 46.7% base case recovery rate on defaulted balances. Fitch derived its asset assumptions from historical data provided by the seller and the agency's expectations of the Spanish economy. Our asset assumptions factor in the transaction's default definition of 150 days in arrears.

Excess Spread

The assets will pay a minimum weighted average (WA) interest rate of 7.85% (as per revolving covenants), resulting in high levels of excess spread at closing. In Fitch's analysis, excess spread contributes to covering a certain proportion of defaulted loans, even in high rating scenarios where coupon compression is assumed.

Servicer Discontinuity Risk

In a stress scenario of servicer failure and cash flow collection disruptions, we expect payment continuity to the rated notes to be maintained, due to the transaction's structural features such as a cash reserve fund and a dedicated commingling reserve, which are fully funded at closing. Additionally, SCF is assuming the role of back-up servicer facilitator with the SPV trustee retaining the decision-making powers in case of servicer substitution, but no back-up servicer will be designated at closing.

Revolving Period Exposure

When setting credit loss expectations, Fitch assumes the collateral migrates to the worst case composition allowed by portfolio covenants applicable during the revolving period. On balance, Fitch believes portfolio covenants and asset eligibility conditions provide sufficient certainty that the collateral risk profile will remain stable. For example, the transaction will cease revolving if the three-month rolling average of loans in arrears over 90 days (excluding defaults) exceeds 0.8% of the portfolio balance.

Sovereign Cap

The class A rating is capped at the maximum achievable structured finance rating in Spain of 'AA+sf', six notches above the sovereign's Issuer Default Rating (IDR, BBB+/Stable/F2).

Excessive Counterparty Exposure

The class B rating is capped at the SPV bank account provider SCF's IDR, as the main source of credit enhancement for this class could be in the form of cash kept at the SPV's bank account given the transaction allows for cash retention during the revolving period to increase to more than 10% of the initial collateral balance. In the event of a jump-to-default of the account bank when large principal collections are retained, the class B notes would be downgraded by more than 10 notches and Fitch therefore deems this counterparty exposure as excessive.


The structure sensitivity to potential variability of key model assumptions is robust, as the transaction benefits from significant excess spread, sufficient credit enhancement and the class A and B notes' ratings are constrained by the sovereign cap and SPV account bank ratings, respectively.

The following are the model-implied sensitivities from a change in selected input variables:

Current ratings:

- Class A notes: 'AA+sf'

- Class B notes: 'A-sf'

Combined increase in default rates by 25% and decrease in recovery rates by 25%:

- Class A notes: 'AA+sf'

- Class B notes: 'A-sf'

Combined increase in default rates by 50% and decrease in recovery rates by 50%:

- Class A notes: 'AAsf'

- Class B notes: 'A-sf'

The class A rating is sensitive to changes to the Spanish sovereign IDRs as it is capped at the maximum achievable rating for Spanish structured finance transactions, and the class B rating is sensitive to the account bank provider's IDR due to excessive counterparty risk assessment.


Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.


Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis.

Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.


The information below was used in the analysis.

-Loan-by-loan data provided by PSA Financial as at 22 August 2016.

-Historical performance provided by PSA Financial for the period 1Q07-1Q16.


A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool will be available by accessing the Auto ABS Spanish Loans 2016, FT, Representations and Warranties - Presale Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016.