As of February 2013, all five transactions had extremely low delinquencies (defined as unpaid instalments for 31 up to 180 days) ranging from 0.3% in SC11-1 to 1.5% in SC06. At the same point in seasoning, the cumulative default rate was 0.98% in SC06, 0.89% in SC09-1, 0.41% in SC10-1, 0.12% in SC11-1 and 0.1% in SC11-2, all of which are better than Fitch’s initial base case expectations. Furthermore, each of the transactions benefit from high prepayment rates (ranging from 10% to 23%), which improves the credit enhancement in the existing capital structure to withstand any future losses in addition to the available excess spread.
No additional clarity has been provided on the court decisions regarding loan handling fees for German consumer loans, which could expose the transactions to additional set-off risk. Fitch has taken this into account in the transaction surveillance analysis, and the risk was considered in light of available excess spread and credit enhancement. Fitch notes that even in an unlikely worst case scenario where the potential set-off risk is applicable to all loan contracts, the class A notes would remain protected due to the high levels of credit enhancement. However, the class B notes would be exposed to this potential risk. This is mitigated by the fact that initial reliance is on Santander Consumer Bank AG (as originator), which according to transaction documentation is obliged to cover any set-off cases for the issuer. Only in the case of default of the originator would this potential risk fall on the SPV.
Uncertainty in this regard has been reflected in the rating of SC11-1 (upgrade of one notch), which is not as seasoned as the earlier deals and could potentially be exposed to future negative decisions regarding the fees. SC11-2, which has a dedicated set-off reserve to cover for the risk, has been upgraded by two notches despite being at the same point in seasoning and exhibiting similar performance.
At closing, SC06’s issuer entered into a rated sub-loan agreement to fund the reserve account. A separate and dedicated cash reserve has been provided by the issuer to fully support the sub-loan by covering any potential shortfalls incurred in the final repayment of the sub-loan. As a result of significant de-leveraging, the sub-loan is now increasingly covered by the dedicated cash collateral account (which currently stands at EUR4.5m). However, the agency has capped the subordinated loan rating at the rating of Santander UK plc (‘A’/ Stable/ ‘F1’) - the account bank where the dedicated cash reserve is deposited.
All five transactions are securitisations of auto loans originated by Santander Consumer Bank AG Moenchengladbach, a wholly-owned subsidiary of Santander Consumer Finance S.A (‘BBB+'/Negative/‘F2’) and extended to individuals in Germany to finance the purchase of the vehicles.
The rating actions are as follows:
SC Germany Auto 06 Plc
EUR75.9m class A notes: affirmed at ‘AAAsf’; Outlook Stable;
EUR90m class B notes: upgraded to ‘AAsf’ from ‘AA-sf’; Outlook Stable;
EUR21.7m subordinated loan affirmed at ‘Asf’; Outlook revised to Stable from Negative
SC Germany Auto 09-1 Ltd
EUR220.1m class A notes: affirmed at ‘AAAsf’; Outlook Stable;
EUR55m class B notes: upgraded to ‘AAsf’ from ‘AA-sf’; Outlook Stable
SC Germany Auto 10-1 UG
EUR152.8m class A notes: affirmed at ‘AAA’; Outlook Stable;
EUR33m class B notes: upgraded to ‘AAsf’ from ‘A+sf’; Outlook Stable
SC Germany Auto 11-1 UG
EUR358.2m class A notes: affirmed at ‘AAA’; Outlook Stable;
EUR27m class B notes: upgraded to ‘AA-sf’ from ‘A+sf’; Outlook Stable
SC Germany Auto 11-2 UG
EUR381.1m class A notes: affirmed at ‘AAA’; Outlook Stable;
EUR27m class B notes: upgraded to ‘AAsf’ from ‘A+sf’; Outlook Stable