Overview
- We have reviewed Cardiff Auto Receivables Securitisation 2019-1 PLC's performance by conducting our analysis of the transaction's underlying assets and structural features.
- Following our review, we have raised to 'AA (sf)' from 'A (sf)' our rating on the class B notes and affirmed our 'AAA (sf)' rating on the class A notes.
- Cardiff Auto Receivables Securitisation 2019-1 PLC is an ABS transaction of U.K. auto loans originated by Black Horse Ltd., which closed in December 2019.
LONDON (S&P Global Ratings) Aug. 25, 2021--S&P Global Ratings today raised to 'AA (sf)' from 'A (sf)' its credit rating on Cardiff Auto Receivables Securitisation 2019-1 PLC's class B notes. At the same time, we affirmed our 'AAA (sf)' rating on the class A notes.
Both our ratings on the class A and class B notes address the timely payment of interest and the ultimate payment of principal.
Today's rating actions follow our review of the transaction's performance and the application of our current criteria. They also reflect our assessment of the payment structure according to the transaction documents (see "Related Criteria").
The transaction closed in December 2019 (see "Related Research") . The pool balance had declined to £335.4 million as of the July 2021 payment date from £610.07 million at closing, bringing the current pool factor (the outstanding collateral balance as a proportion of the original collateral balance) to approximately 55%.
A combination of subordination and excess spread (if available) provide credit enhancement to the rated notes. The transaction also has a residual value top-up reserve, which was funded at closing through the subordinated loan. The residual value top-up reserve is available to cover certain losses arising from —personal contract purchase (PCP) handbacks and voluntary terminations (VTs). However, since the counterparty risk of the bank account provider holding these funds is not mitigated, we have not given any benefit to it in our analysis.
The fully sequential repayment of principal has reduced the class A notes' balance to £149.4 million from £424.0 million in December 2019, resulting in increased credit enhancement of 55.46% for this class of notes, compared with 30.50% at closing. Similarly, the available credit enhancement for the class B notes has increased to 32.73%, from 18.00% over the same period.
We have reviewed historical performance measures such as delinquencies, gross losses, and recovery rates, considering macroeconomic and industry trends. We have maintained our expected base case of defaults of 2.00% for hostile terminations (HTs) and 3.07% for VTs, and maintained a recovery rate of 38.58%, which reflect our economic outlook for the U.K.
Of the portfolio, currently 76.6% comprises residual values, which are subject to market value decline risk. We based our analysis on our view of potential market value declines at various rating levels. Our adjusted market value decline assumption is 38.33% at a 'AAA' rating level.
Table 1
Credit Assumptions | |
---|---|
Parameter | Current |
Gross loss base case (%) | 2.0 |
Gross loss multiple ('AAA') | 5.0 |
Gross loss multiple ('AA') | 4.0 |
Recovery rate (%) | 38.58 |
RV loss ('AAA') (%) | 38.33 |
RV loss ('AA') (%) | 30.68 |
*The blended default rate is calculated by adding the large obligor defaults for a rating category as determined above to the corresponding rating-level default applied to the remaining balance of the pool. RV—Residual value. |
Our operational and legal risk analysis is unchanged since closing. We consider that the transaction documents adequately mitigate the transaction's exposure to counterparty risk through the transaction bank account provider, swap counterparty and guarantor, Lloyds Bank PLC and Black Horse Ltd., up to a 'AAA' rating.
Our analysis indicates that the available credit enhancement for the class A and B notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA' and 'AA' rating levels, respectively.
Our credit and cash flow analysis indicates that the class B notes can attain a higher rating than that currently assigned. We have therefore raised to 'AA (sf)' from 'A (sf)' our rating on the class B notes. We have also affirmed our 'AAA (sf)' rating on the class A notes.
Cardiff Auto Receivables Securitisation 2019-1 PLC is an ABS transaction of U.K. auto loans originated by Black Horse Ltd., which closed in December 2019.
Related Criteria
- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- General Criteria: Guarantee Criteria, Oct. 21, 2016
- Criteria | Structured Finance | ABS: Methodology And Assumptions For European Auto ABS, Oct. 15, 2015
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- Criteria | Structured Finance | ABS: Global Methodology And Assumptions For Assessing The Credit Quality Of Securitized Consumer Receivables, Oct. 9, 2014
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009
- Criteria | Structured Finance | ABS: European Consumer Finance Criteria, March 10, 2000
Related Research
- The Economy Is Responding Quickly to The Grand Reopening, July 9, 2021
- ESG Industry Report Card: Auto Asset-Backed Securities, March 31, 2021
- United Kingdom 'AA/A-1+' Ratings Affirmed; Outlook Stable, April 23, 2021
- Economic Outlook Europe Q2 2021: The Path To A Strong Restart, March 25, 2021
- S&P Global Ratings Definitions, Jan. 5, 2021
- European Structured Finance Outlook H2 2020: Weathering The Storm, July 28, 2020
- New Issue: Cardiff Auto Receivables Securitisation 2019-1 PLC, Dec. 4, 2019
- Credit FAQ: Questions Over Electric Vehicle Residual Values In European Auto ABS, May 31, 2019
- 2017 EMEA ABS Scenario And Sensitivity Analysis, July 6, 2017
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
Primary Credit Analyst: | Amit Einhorn, London +44 (0)20 7176 0513; amit.einhorn@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.