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    NEWS

    RevoCar 2019-2 German Auto ABS Ratings Affirmed; One Rating Removed From CreditWatch Negative
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    Weekly European CLO Update


    RevoCar 2019-2 German Auto ABS Ratings Affirmed; One Rating Removed From CreditWatch Negative

    Overview

    • On May 11, 2020, we placed on CreditWatch negative our ratings on RevoCar 2019-2's class D-Dfrd notes.
    • Following our review of this transaction under our relevant criteria, we have affirmed our ratings on all classes of notes and resolved our CreditWatch placement.
    • RevoCar 2019-2 is a German ABS transaction that securitizes a portfolio of auto loan receivables that Bank11 für Privatkunden und Handel GmbH (Bank11) originated and granted to private and commercial customers in Germany.

    FRANKFURT (S&P Global Ratings) Aug. 5, 2020--S&P Global Ratings today affirmed its credit ratings on all classes of notes issued by RevoCar 2019-2 UG (haftungsbeschrankt). At the same time, we removed from CreditWatch negative our credit rating on the class D-Dfrd notes.

    Today's rating actions follow our review of the transaction's performance and the application of our relevant criteria, and considers the transaction's current structural features (see "Related Criteria").

    We placed the rating on the class D-Dfrd notes on CreditWatch negative following our update on the credit and cash flow assumptions that we apply in our European auto and consumer ABS analysis (see "European Auto And Consumer ABS: Analysis Adjusted To Reflect COVID-19 Effects," published May 11, 2020 and "Seven Ratings From Four German, French, And Spanish ABS Transactions Placed On Watch Negative," published May 11, 2020). The adjustments reflect the effects of COVID-19 and the associated lockdown and social distancing measures introduced across Europe by the respective governments since early March.

    In our analysis, we have increased our base-case default rate assumptions for both sub-pools to 2.25% from 2.00% at closing to reflect our macroeconomic projections stemming from the spread of COVID-19. As we do not currently believe that the expected level of macroeconomic stress warrants an overarching revision to the stressed default assumptions at the 'BBB' rating level or higher, we have offset the impact of such increased base-case default rates by reducing the corresponding multiple on rating levels of 'BBB' and higher. We have maintained the same recovery assumptions and balloon loss assumptions since closing. We have also tested the impact of forbearance measures, like the impact of the German moratorium scheme (payment holidays), and disruptions in recovery processes in this transaction.

    As of the June 2020 investor report, delinquencies totaled 0.07% and 0.02% for the 30-60 and 60-90 day arrears buckets, respectively, which is almost unchanged compared to February 2020. Overall, delinquencies have remained stable and very low, and we did not observe a worsening of portfolio performance. At the same time, we understand that the level of payment holidays granted by Bank 11 in this transaction is below 2%. In Germany, a payment holiday scheme was introduced by legislation in mid-March, which allowed borrowers to request the deferral of loan installments by up to three months during April, May, and June due to reasons caused by the COVID-19 pandemic. The scheme was not extended and expired at the end of June, meaning COVID-19-related payment holiday requests will not be granted going forward.

    We have performed our cash flow analysis to test the effect of the amended credit assumptions. We have applied certain liquidity stresses, such as a delay in cash receipts due to payment holidays and extended recovery timing.

    RevoCar 2019-2 is still in its revolving phase (until October 2023), and consequently none of the rated notes benefit from an increase in credit enhancement since closing.

    Our cash flow analysis indicates that the available credit enhancement for the class A, B-Dfrd, and C-Dfrd, notes is sufficient to withstand the credit and cash flow stresses that we apply at the currently assigned ratings. Therefore, we have affirmed our ratings on the class A, B-Dfrd, and C-Dfrd notes at 'AAA (sf)', 'A (sf)', and 'BBB (sf)' respectively.

    In our cash flow analysis of the class D-Dfrd notes, we considered the low and stable historical prepayment rate, low interest rate environment, and low level of reported payment holidays. We also considered that this tranche is particularly sensitive to a high prepayment scenario because of the lower level of available excess spread under this scenario. We also factored the result of a sensitivity run using a lower prepayment stress. Our cash flow results for this tranche are based on this sensitivity rather than our standard run. We have therefore affirmed and removed from CreditWatch negative our 'BB (sf)' rating on this class of notes.

    Our ratings in this transaction are not constrained by the application of our sovereign risk criteria for structured finance transactions or our counterparty risk criteria. Furthermore, our operational risk criteria do not cap this transaction's ratings.

    S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. We are using this assumption in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

    RevoCar 2019-2 is a German ABS transaction that securitizes a portfolio of auto loan receivables that Bank11 für Privatkunden und Handel GmbH (Bank11) originated and granted to private and commercial customers in Germany.

    Related Criteria

    Related Research

    Primary Credit Analyst:David Tuchenhagen, Frankfurt + 49 693 399 9307;
    david.tuchenhagen@spglobal.com
    Research Contributor:Trupti Patil, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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