Ochiba 2015 B.V. Presale: Table Of Contents Billion Asset-Backed Floating-Rate Notes (Including Unrated Million Subordinated Notes)

Transcription

1 Presale: Ochiba 2015 B.V. Primary Credit Analyst: Doug Paterson, London (44) ; Table Of Contents Billion Asset-Backed Floating-Rate Notes (Including Unrated Million Subordinated Notes) Transaction Summary Rating Rationale Strengths, Concerns, And Mitigating Factors Transaction Structure Collateral Description Credit Analysis Cash Flow Analysis Monitoring And Surveillance Scenario Analysis Standard & Poor's 17g-7 Disclosure Report Related Criteria And Research APRIL 14,

2 Presale: Ochiba 2015 B.V Billion Asset-Backed Floating-Rate Notes (Including Unrated Million Subordinated Notes) This presale report is based on information as of April 14, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Class Prelim. rating* Prelim. amount (mil. ) Available credit enhancement (%) Interest A1 AAA (sf) One-month EURIBOR plus a margin A2 AAA (sf) One-month EURIBOR plus a margin B AA (sf) One-month EURIBOR plus a margin C A (sf) One-month EURIBOR plus a margin Legal final maturity November 2075 November 2075 November 2075 November 2075 D NR N/A November 2075 E NR N/A November 2075 *The rating on each class of securities is preliminary as of April 14, 2015 and subject to change at any time. We expect to assign final credit ratings on the closing date subject to a satisfactory review of the transaction documents and legal opinion. Standard & Poor's ratings address timely interest and ultimate principal. Includes 2% from an amortizing reserve. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. Transaction Participants Arranger Commingling guarantor Issuer administrator Issuer account bank Originators and sellers Paying and listing agent Servicer Crédit Agricole Corporate and Investment Bank S.A. Crédit Agricole Consumer Finance S.A. Intertrust Administrative Services B.V. Crédit Agricole Corporate and Investment Bank S.A. Crediet Maatschappij De IJssel B.V., Eurofintus Financieringen B.V., Mahuko Financieringen B.V., Voordeelbank B.V., Intermediaire Voorschotbank B.V., Ribank N.V., Finata Bank N.V., IDM Financieringen B.V., De Nederlandse Voorschotbank B.V., and InterBank N.V. Deutsche Bank AG Crediet Maatschappij De IJssel B.V., Eurofintus Financieringen B.V., Mahuko Financieringen B.V., Voordeelbank B.V., Intermediaire Voorschotbank B.V., Ribank N.V., Finata Bank N.V., IDM Financieringen B.V., De Nederlandse Voorschotbank B.V., and InterBank N.V. Security trustee Stichting Security Trustee Ochiba 2015 Listing agent Supporting Rating ING Bank N.V. Institution/role Crédit Agricole Corporate and Investment Bank S.A. as issuer account bank Crédit Agricole Consumer Finance S.A. as commingling guarantor Ratings A/Negative/A-1 A/Negative/A-1 APRIL 14,

3 Transaction Key Features Expected closing date April 21, 2015 Collateral Unsecured revolving consumer loans granted to borrowers resident in the Netherlands Number of loans Approximately 43,000 Outstanding principal balance (mil. )* 1,049,999,976 Average outstanding principal balance ( )* 24,387 Weighted-average seasoning (months)* Weighted-average remaining term (years)* 19.8 Weighted-average interest rate (%)* 7.11 Assets' country of origin The Netherlands Transaction structure Class A notes (45%), class B notes (12%), class C notes (12%), and unrated class D notes (31%) Asset profile Interest-only loans (40%) and standard amortizing loans (60%) *As of March 31, Transaction Summary Standard & Poor's Ratings Services has assigned its preliminary 'AAA (sf)' 'AAA (sf)', 'AA (sf)', and 'A (sf)' credit ratings to Ochiba 2015 B.V.'s asset-backed floating-rate class A1, A2, B, and C notes, respectively. At closing, Ochiba 2015 will also issue unrated class D and class E notes. At closing, Ochiba 2015 will use the issuance proceeds of the class A, B, C, and D notes to fund the purchase of the collateral. The collateral comprises unsecured consumer loans that Crédit Agricole Consumer Finance Nederland B.V.'s subsidiaries originated for its Dutch customers. At closing, the collateral will comprise approximately 43,000 interest-only and standard amortizing loans, totaling 1.05 billion. This is a revolving transaction. During the 18-month revolving period, the issuer will make no payments of principal on the notes and will use principal receipts to purchase additional loans and further advances receivables. Furthermore, borrowers can draw further advances up to their respective credit limits, which the issuer will purchase both during and after the revolving period. Ochiba 2015 is a securitization of Crédit Agricole Consumer Finance Nederland's 1.05 billion portfolio of Dutch consumer loans, which have a maximum credit limit of 100,000. The pool includes revolving interest-only loans ("Aflossingsvrij Doorlopend Krediet") and standard revolving amortizing loans ("Doorlopend Krediet"). Our preliminary ratings on the class A1, A2, B, and C notes reflect our assessment of the underlying asset pool's credit and cash flow characteristics, as well as our analysis of the transaction's exposure to counterparty, legal, and operational risks. Our analysis indicates that the class A1, A2, B, and C notes' available credit enhancement will be sufficient to mitigate noteholders' exposure to credit and cash flow risks at the assigned preliminary rating levels. Rating Rationale APRIL 14,

4 Economic outlook In order to set our assumptions, we considered our forecasts for the Dutch economy. In particular, we view unemployment as being one of the key determinants of performance for consumer asset-backed securities (ABS) transactions. We expect unemployment to decline to 6.4% in 2015 and 2016, from 6.8% in 2014 (compared with less than 4.0% in 2009) (see "Low Interest Rates Are Only Slowly Reviving Europe's Housing Markets," published Feb. 5, 2015). "European Economic Outlook: U.K. Consumers Lead The Way, While Deflation Haunts The Eurozone," published on April 25, 2014). In summary, we expect the Dutch economy to stabilize in 2015, with a gradual reduction in unemployment. Despite our near-term outlook for the Dutch economy, the transaction's potentially long life may expose it to greater variances in macroeconomic conditions. We have accounted for this when setting our base-case assumptions and credit expectations. Credit risk We have analyzed credit risk by applying our European consumer finance criteria (see "European Consumer Finance Criteria," published on March 10, 2000). We have used the originators' historical performance data to size our base-case gross loss and recovery rate assumptions. This is a revolving transaction. During the 18-month revolving period, the issuer will make no payments of principal on the notes and will use principal receipts to purchase additional loans and further advances receivables. Furthermore, borrowers can draw further advances up to their respective credit limits, which the issuer will purchase both during and after the revolving period. As borrowers can obtain further advances, the loans have a revolving feature. The portfolio's weighted-average borrowers' age is 47.5 years. Borrowers will commence amortization once they have reached the age of 60 or 66, from that date the credit limit amortizes in equal monthly amounts until the borrower has reached 65, 68, 74, 72, or 75 years old. We have set our base-case assumptions by taking into consideration the potentially long revolving period resulting from borrowers obtaining further advances. Following our view of the increased uncertainty associated with the transaction's potentially longer life, we have applied moderate-to-high rating level loss multiples and recovery rate haircuts (discounts) for the assigned rating levels. We did not apply the highest levels of loss multiples and haircuts, as we consider Crédit Agricole Consumer Finance Nederland's subsidiaries to be experienced in their respective roles as the transaction's originators and servicers. Payment structure We have analyzed the payment structure and other structural features of the transaction under our European consumer finance criteria. The transaction will have separate principal and interest waterfalls. A principal deficiency ledger (PDL) comprising three subledgers (one each for the class A, B, and C/D notes) is in place to record (i) any realized loss on the loans, and (ii) any interest shortfall amount. The results of our cash flow runs are in line with our preliminary 'AAA (sf)', 'AAA (sf)', 'AA (sf)', and 'A (sf)' ratings on the class A1, A2, B, and C notes, respectively. The issuer can use principal collections to purchase further advances. A reserve account will be present in the APRIL 14,

5 transaction, which will initially be sized at 2.0% of the value of the class A, B, C, and D notes. The reserve will be funded by the proceeds from the class E notes. The reserve will amortize in line with the class A, B, C, and D notes, subject to a floor (minimum level) of 0.5% of the class A, B, C, and D notes' closing balance, as long as the notes are outstanding. Once the class A, B, and C notes are fully repaid, the reserve amortizes to zero. The interest on the notes is based on floating-rate one-month Euro Interbank Offered Rate (EURIBOR). The loans bear a variable rate and the sellers have stated that they will use their best efforts to maintain a weighted-average yield on the collateral of at least one-month EURIBOR plus a margin of 6.5% per year. An interest rate swap will not be in place. Furthermore, under our European consumer finance criteria, we ran a high and low prepayment scenario, as well as up, flat, and down interest rate vectors, and equal and back-loaded default curves. We used the back-loaded default curve to test the reserve's floor. Our cash flow runs at the assigned preliminary rating levels show that the rated notes pay timely interest and ultimate principal. Counterparty risk Credit Agricole Corporate and Investment Bank S.A. will be the issuer account bank. Our long- and short-term issuer credit ratings on the bank, and the documented replacement triggers support our preliminary ratings on the class A, B, and C notes under our current counterparty criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013). Legal risk We consider that the issuer will be bankruptcy remote under our European legal criteria (see "Europe Asset Isolation And Special-Purpose Entity Criteria--Structured Finance," published on Sept. 13, 2013). Set-off risk If a borrower cannot obtain a further advance due to the originator's insolvency, the borrower may have the right to set-off the cost of a substitute loan during the two-month notice period in which to terminate the loan. We have sized a stressed set-off amount, which we deducted from our cash flow run at closing. In our opinion, there are no other set-off risks in the transaction, as the pool does not contain loans granted to the originators' employees and the originators are not deposit-taking institutions. Rating stability We have analyzed the effect of a moderate stress on our credit assumptions and their ultimate effect on the preliminary ratings assigned to the class A, B and C notes. We ran two scenarios and the results are in line with our credit stability criteria (see "Methodology: Credit Stability Criteria," published on May 3, 2010). Strengths, Concerns, And Mitigating Factors Strengths The sellers are all Crédit Agricole Consumer Finance Nederland's wholly owned subsidiaries. The originator, Crédit Agricole Consumer Finance Nederland, is a wholly owned subsidiary of Crédit Agricole Consumer Finance S.A. We consider the originator to be experienced in securitization. APRIL 14,

6 The seller grants further advances to the borrowers. The issuer is never obliged, at any point in the transaction's life, to grant further advances to the borrowers. Concerns and mitigating factors The transaction could potentially have a long life, as certain borrowers can request a further advance until they reach 66 years of age. From that date, the credit limit amortizes in equal monthly amounts until the borrower has reached 65, 68, 74, 72, or 75 years old. The portfolio's weighted-average borrowers' age is 47.5 years and we have set our base-case assumptions by taking into consideration the potentially long revolving period resulting from borrowers obtaining further advances. While it is the seller's obligation to grant a further advance, the borrowers may have a set-off claim against the issuer for the interest expense on an alternate loan, if the seller's insolvency meant that they were denied a further advance loan. We have sized this set-off cost in our cash flow model. The transaction has a dynamic commingling reserve, which Crédit Agricole Consumer Finance guarantees at a level equivalent to at least 2.7 months' worth of collections. As the guarantor is rated, and the reserve will be funded if the guarantor's rating falls below 'BBB', we are able to rely on this commitment. Approximately 60% of the pool comprises amortizing loans; the remaining 40% of the pool comprises interest-only loans. Certain interest-only loans would be rolled over into a further interest-only period if certain conditions are met. We have modeled an amortization profile that takes these features into account. Transaction Structure Ochiba 2015 is a special-purpose entity (SPE) established under Dutch law. We consider the issuer to be bankruptcy remote under our European legal criteria. At closing, it will purchase 1.05 billion of consumer loans from the sellers. The issuer will purchase these loans using the proceeds of the class A, B, C, and D notes. The class A, B, and C notes pay a floating rate of interest based on one-month EURIBOR plus a margin. The loans bear a variable rate and the sellers have stated that they will use their best efforts to maintain a weighted-average yield on the collateral of at least one-month EURIBOR plus a margin of 6.5% per year. An interest rate swap will not be in place. APRIL 14,

7 Revolving period This is a revolving transaction. During the 18-month revolving period, the issuer will make no payments of principal on the notes and will use principal receipts to purchase additional loans, Furthermore, borrowers can draw further advances up to their respective credit limits, which the issuer can purchase both during and after the revolving period. The documented revolving period concentration limits state that loans with a credit limit exceeding 25,000 may not exceed 88% of the pool based on the aggregate credit limit. We have modeled this worst-case pool composition in our cash flow analysis. The seller can grant a further advance loan under any interest-only loan or amortizing loan. Under the transaction documents, certain borrowers can obtain a further advance up to the age of 66 years. Due to the added uncertainties arising over this potentially long timeframe, we have taken a conservative approach when setting our base-case assumptions. APRIL 14,

8 Chart 2 Originator Crédit Agricole Consumer Finance Nederland originated the underlying loans through its various operating entities (Crediet Maatschappij De IJssel B.V., Eurofintus Financieringen B.V., Mahuko Financieringen B.V., Voordeelbank B.V., Intermediaire Voorschotbank B.V., Ribank N.V., Finata Bank N.V., IDM Financieringen B.V., De Nederlandse Voorschotbank B.V., and InterBank N.V.). The originator is active in the Dutch consumer credit market, having a 16.4% share of the consumer finance market in Most credit applications are intermediated through third-party brokers (98.9%) and a relatively small portion of the credit applications are submitted from customers online. The third-party brokers are entitled to receive commission payments for the loans that they originate, which are paid outside of the transaction's cash flows. Underwriting policy The originator assesses all credit applications using a fully automated credit scoring system. It does so in order to ensure that they are consistent with its underwriting guidelines and to check whether the files are complete. The originator's central underwriting department--not the third-party originators--checks all necessary original documentation before the loans are drawn up. External data from the Dutch Credit Bureau (BKR) is incorporated and an application would be unsuccessful if there is an active arrears code for the borrower at the BKR. Applications go through two scorecards, which are periodically validated by third parties. APRIL 14,

9 Priority of payments We have analyzed the transaction's payment structure under our European consumer finance criteria. The transaction has separate principal and interest waterfalls, with a PDL comprising three subledgers (one each for the class A, B, and C/D notes) for the principal waterfall. The PDLs enable the issuer to borrow interest to cure any principal losses. Principal can also be used to pay interest on the class A notes if there is any revenue shortfall on the payment of interest on the class A notes. However, principal cannot be used to pay interest on any of the other classes of notes. The issuer can use principal collections to purchase further advances. Interest Available Funds 1 Interest; 2 Recoveries; 3 Guaranteed investment contract (GIC) interest; 4 Proceeds corresponding to the interest component from loan sales or repurchases; 5 Commingling account drawings relating to interest, which is only applicable upon a servicer termination event; 6 Any drawings on the reserve account; and 7 Available amounts in the issuer collection account after interest and principal due on the notes have been paid in full. Interest Priority Of Payments 1 Fees, including the issuer, shareholder, and security trustee's fees; 2 Fees, including the administrator and servicer's fees; 3 Rating agency and paying agent fees; 4 The class A1 notes' interest and the class A2 notes' interest; 5 Clear the class A PDL; 6 The class B notes' interest; 7 Clear the class B PDL; 8 The class C notes' interest; 9 Clear the class C/D PDL; 10 Fund the reserve account up to the reserve account required amount; 11 During the revolving period, to fund the initial purchase price of additional loan receivables up to the aggregate outstanding interest amount; 12 Fees and charges due to joint lead managers; 13 The class D notes' interest; 14 Principal and interest on class E notes; and 15 Deferred purchase price to sellers. Principal Available Funds 1 Principal from repayments and prepayments; 2 Any amounts corresponding to the principal component from loan sales or repurchases; 3 Any credit amounts in the PDL; and 4 Any drawings from the commingling reserve relating to principal, which is only applicable upon a servicer termination event. Principal Priority Of Payments 1 Senior fees and class A1 and A2 notes' interest where applicable; 2 During the revolving period, to fund the initial purchase price of further advance receivables where owing; APRIL 14,

10 Principal Priority Of Payments (cont.) 3 During the revolving period, to fund the initial purchase price of additional loan receivables; 4 The class A1 notes' principal until fully repaid; 5 The class A2 notes' principal until fully repaid; 6 The class B notes' principal until fully repaid; 7 The class C notes' principal until fully repaid; 8 After the revolving period, to fund the initial purchase price of relevant further advance receivables; and 9 Redeem the class D notes until fully repaid. Commingling risk The borrowers pay into the seller's collection accounts. The funds are then transferred into the issuer's bank account once a month. If the seller or the servicer were to become insolvent, funds due to the issuer would become commingled with those of the bankrupt estate and ultimately lost. Upon servicer insolvency, we would consider approximately 2.7 months' of collections to be lost. The transaction has a dynamic commingling reserve, which Crédit Agricole Consumer Finance guarantees at a level equivalent to at least 2.7 months' worth of collections. As the guarantor is rated, and the reserve will be funded if the guarantor's rating falls below 'BBB', we are able to rely on this commitment. Set-off risk While it is the seller's obligation to grant a further advance, the borrowers may have a set-off claim against the issuer for the interest expense on an alternate loan, if the seller's insolvency meant that they were denied a further advance loan. We have sized this expense at a stressed rating level and have made a set-off risk in our cash flow model. As the originators do not take deposits, there is no deposit set-off risk in this transaction. The transaction's eligibility criteria do not permit loans granted to the originator's employees, so there is no employee set-off risk in the transaction. Servicing risk Each of the sellers, in their respective roles as servicers, has outsourced servicing activities for the portfolio's loans to Crédit Agricole Consumer Finance Nederland as sub-servicer. Crédit Agricole Consumer Finance Nederland's servicing is performed by the client management department, which in turn is split into two teams: the client service desk and the portfolio management team. The sub-servicer has a fully integrated software system that facilitates communications between all aspects of the banking network, including the servicing and administration department and the collection department. The sub-servicer is experienced in securitization. In our opinion, it is able to service the loans as required under the transaction documents. Collateral Description Dutch consumer loans The consumer loans are unsecured, originated by wholly owned subsidiaries of Crédit Agricole Consumer Finance APRIL 14,

11 Nederland, and granted to Dutch residents. At closing, approximately 40% of the total assets comprise interest-only loans, where the borrower only pays interest for a period of time before their loan starts to amortize. After this period, the loans will enter into amortization, at which point the borrower will make both principal and interest repayments. The remaining 60% of the pool comprises "standard" loans, where the borrowers make both principal and interest repayments from the outset. Chart 3 APRIL 14,

12 Chart 4 Borrowers can request a further advance drawing from the sellers, if available under their credit limits. The issuer can purchase these further advances using principal collections and excess spread. This obligation to extend a further advance always rests with the sellers--never with the issuer. If a seller were to become insolvent and the borrower is subsequently denied a further advance, then they may have a set-off claim against the issuer. We have taken this into consideration in our analysis and sized it under our cash flow modeling scenario. Loan eligibility criteria under the transaction documents The loan qualifies as a standard revolving loan ("doorlopend krediet") or an interest-only loan ("aflossingsvrij doorlopend krediet"); The loan receivable is denominated and payable in euro; The credit limit does not exceed 100,000, and the aggregate outstanding principal amount under the loan is either equal to, or less than, the credit limit; The borrower is a natural person ("natuurlijk persoon") aged between 18 years old and 65 years old at the time of origination; The credit limit is reduced each month by equal amounts once the borrower reaches the age of 60 or 66, as applicable. The outstanding amount under the loan needs to be fully repaid once the borrower reaches either the age of 65, 68, 72, 74, or 75, as applicable; The borrower was a resident of the Netherlands at the time of origination of the relevant loan; APRIL 14,

13 Interest payments are scheduled to be made monthly in arrears and principal payments are scheduled to be made monthly, where applicable; The borrower, or a third party on its behalf, has paid at least one interest payment; No withholding tax or other deduction applies to the loan receivable; The loan bears a variable rate of interest set by the relevant seller, which the seller may adjust or amend; The loan receivables are not in arrears for more than 10 days, the loans from which further advance receivables result are not in arrears on the further advance origination date, and additional loan receivables are not in arrears for more than 10 days; The payment of the loan receivables is made by direct debit or through periodic automatic transfers from a bank account; The borrower does not have a negative registration at the National Credit Register ("Bureau Krediet Registratie") at the time of origination; The borrower, at the time of origination of the relevant loan or further advance, did not self-certify their income; The borrower is not bankrupt, or subject to debt restructuring, ("schuldsanering natuurlijke personen") and no proceedings against the borrower are pending in any jurisdiction; The relevant seller originated the loan receivable in or after 2004; There is no savings insurance policy ("spaarpolis") attached to the loan; At the time of origination, the borrower had a client profile corresponding to an expected probability of default over an 18 month period equal to, or less than, 2.0%; and With respect to any additional loan that is a standard revolving loan, the contractual minimum amount that the borrower has to pay is not less than 1.0% of the credit limit. Loan type APRIL 14,

14 Chart 5 Standard revolving loans "Doorlopend Krediet" The borrower's monthly installments are expressed as a percentage of their loan limit. The monthly installment goes first toward the payment of interest on the loan. Interest-only loans "Aflossingsvrij Doorlopend Krediet" These loans are interest-only for an initial period, after which the borrower can: Fully repay the loan in one lump sum; Start paying interest plus principal on the loan; or Renew the interest-only period, subject to certain conditions. However, under the transaction documents, each seller has undertaken to use its commercially reasonable efforts to refuse any such extension request or, if granted, to repurchase and accept reassignment of the renewed interest-only loan if the cumulative number of interest-only loans having an extension breaches 4% of the initial number of loan receivables. Borrowers will commence amortization once they have reached the age of 60 or 66. From that date the credit limit amortizes in equal monthly amounts until the borrower has reached 65, 68, 74, 72, or 75 years old. APRIL 14,

15 Loan with a promise to mortgage "Krediet met Hypotheekverklaring, WOZ-Krediet" On both standard revolving loans and interest-only loans, under the WOZ-Krediet loan product the borrower commits to mortgage his primary residence to the seller upon the seller's demand and subject to certain conditions. The relevant mortgage is then vested for an amount equal to the relevant credit limit increased by 40% to account for interest and costs, and can be demanded by the seller if the borrower becomes delinquent. Credit Analysis We assessed the transaction's exposure to credit risk under various stress scenarios by applying our European consumer finance criteria. We have derived our base-case assumptions for four individual subpools separately (i.e., the interest-only loans and the standard revolving loans each split by loan size above and below 25,000). We combined the four on a weighted-average basis. As the transaction is revolving, we modeled a worst-case pool composition. The revolving period concentration limits state that loans that have a credit limit exceeding 25,000, may not exceed 88% of the pool based on the aggregate credit limit. In determining our base-case assumptions, we took into account the current stabilization of unemployment, and house prices observed in the Dutch economy. In addition to these factors, we took into account the potentially long life of the transaction based on the borrowers' ability to obtain further advances. We applied rating level multiples to our base-case assumptions based on our experience of the originator in executing its obligations under the transaction documents, as well as our view of the potential external shocks to the transaction. The further advance feature could extend the transaction's life, thereby exposing it to external shocks arising from any further deterioration in the Dutch economy. In our experience, Crédit Agricole Consumer Finance has successfully performed its obligations under the previous issuance of Chagoi 2010 B.V. and Kigoi 2013 B.V. The timeliness and quality of reporting has also been strong. APRIL 14,

16 Chart 6 APRIL 14,

17 Chart 7 APRIL 14,

18 Chart 8 APRIL 14,

19 Chart 9 Table 1 Credit Assumptions Rating level Base-case gross loss rate assumption (%) Rating stress multiple (x) AAA AA A Recoveries, timings and recovery rate haircuts All of the loans are unsecured. Recoveries on unsecured loans tend to be lower than secured loans, where collateral backs the defaulted receivable. We have used the originators' historical recovery data to derive a base-case recovery rate expectation, recovery timing, and appropriate rating level haircuts that incorporate our current view of the Dutch economy and the likelihood of recoveries. APRIL 14,

20 Chart 10 APRIL 14,

21 Chart 11 APRIL 14,

22 Chart 12 APRIL 14,

23 Chart 13 Table 2 Credit Assumptions Rating level Base-case recovery rate (%) Stress haircut (%) AAA AA A Cash Flow Analysis Our rating analysis includes an assessment of the credit risk inherent in the transaction and, ultimately, the ability of the cash flows generated from the assets to pay interest on the notes on a timely basis and to repay the notes by the legal final maturity date. We sized the credit enhancement levels after analyzing the effect of rating-specific stress scenarios on the collateral. In determining the credit quality of a loan pool, we must estimate an expected case of potential losses that could occur to ascertain the amount of loss protection needed for the notes to achieve the assigned rating. APRIL 14,

24 We replicated the transaction using a cash flow model to test the robustness of the cash flows generated after applying severe stress scenarios to the transaction commensurate with each rating level. Stresses included defaults, delinquencies, prepayment rates, varying interest rate environments, and a day one loss amount for borrower set-off risk. We modeled three different interest rate scenarios--rising, falling, and stable--using both high and low prepayment assumptions, with a high of 12.0%, or a low of 0.0%. For stable interest rates, we held the interest rate at the current rate throughout the transaction's life. We have also tested the effect of negative interest rates, but for this transaction we do not view our negative interest rate stress as being the most stressful scenario. We ran two prepayment scenarios, a high (30.0%) and a low (0.5%) scenario. We based the high scenario on observed historic data. We assumed defaults occur over a three-year recession, with defaults distributed evenly throughout the recession period, back-loaded (10%, 20%, 30%, and 40%) in order to test the reserve's floor, and front-loaded (40%, 30%, 20%, and 10%). We found that the class A, B, and C notes paid timely interest and ultimate principal under their respective rating scenarios. Monitoring And Surveillance We continue to surveil this transaction by monitoring the gross loss, recovery rates, and arrears levels. Scenario Analysis This scenario analysis section incorporates: A description of our methodology and scenario stresses; Results of the effects of the stresses on ratings; and Results of the effects of the stresses on our cash flow analysis. Methodology When rating European auto and consumer ABS transactions, we have developed a scenario analysis and sensitivity-testing model framework. This demonstrates the likely effect of scenario stresses on the ratings in a transaction over a one-year outlook horizon. For these types of securities, there are many factors that could cause the downgrade and default of a rated note, including asset performance and structural features. However, for the purposes of this analysis, we focused on the three fundamental drivers of collateral performance, namely: Gross loss rate; Recovery rate; and Prepayment rate. Given current economic conditions, the stress scenarios proposed reflect negative events for each of these variables. In our view, increases in gross default rates could arise from a number of factors, including rises in unemployment and company insolvencies, together with falls in house prices and a reduction in the availability of credit. In addition, these APRIL 14,

25 effects would most likely cause collateral recovery rates to fall as the structural imbalance between supply and demand leads to reductions in asset prices. In this environment, we also expect prepayment rates to fall as fewer refinancing options leave obligors unable to prepay finance agreements and demand for replacement vehicles falls. For this analysis, we have included two stress scenarios to demonstrate the rating transition of a bond (see below). Table 3 Scenario Stresses Rating variable Scenario 1 (relative stress to base-case) Scenario 2 (relative stress to base-case) Gross loss rate (%) Recovery rate (%) (30.0) (50.0) Constant prepayment rate (%) (20.0) (33.3) Our base-case assumptions for each transaction are intended to be best estimates of future performance for the asset portfolio. Our approach in determining these base-case assumptions would take account of historically observed performance and an expectation of potential changes in these variables over the life of the transaction. The sensitivity of rated bonds in each transaction will differ depending on these factors, in addition to the structural features of the transaction, including its reliance on excess spread, payment waterfalls, and levels of credit enhancement at closing. For each proposed scenario stress, we separate the applied methodology into three distinct stages. In the first stage, we stress our expected base-case assumptions over a one-year period to replicate deviations away from our expected performance over the stress horizon. We assume that the stresses that we apply occur at closing, and apply gross losses based on our expectation of a cumulative default curve for the portfolio. The second stage applies our usual rating methodology, including revising our base-case assumptions at the one-year horizon to reflect the assumed deviations as a result of the stressed environment. In the final stage of the analysis, we re-rate the transaction at the one-year horizon, after revising our base-case assumptions and applying our standard credit and cash flow stresses at each rating level. The output of the analysis shows the likely rating transition of the rated notes given the applied stresses and the value and timing of any forecasted principal and interest shortfalls under the most stressful scenario. Scenario stress and sensitivity analysis When applying scenario stresses in the manner described above, the results of this modeling are intended to be a simulation of what could happen to the ratings on the notes for the given transaction. For the purposes of our analysis of this transaction, we applied the two scenarios described above in our cash flow modeling. Table 4 below shows our implied scenario stress results. Table 4 Scenario Stress Analysis: Rating Transition Results Scenario stress Class Preliminary rating Scenario stress rating Scenario 1 A AAA (sf) AAA B AA(sf) AA C A (sf) A APRIL 14,

26 Table 4 Scenario Stress Analysis: Rating Transition Results Scenario 2 (cont.) A AAA (sf) AA+ B AA(sf) AA- C A (sf) A Our scenario analysis has resulted in rating outcomes either equivalent to, or higher than our initial preliminary rating. This is due to the comparatively high stress levels that we have assigned to the base-case defaults and haircuts for the transaction. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at Related Criteria And Research Related criteria Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014 Europe Asset Isolation And Special-Purpose Entity Criteria--Structured Finance, Sept. 13, 2013 Counterparty Risk Framework Methodology And Assumptions, June 25, 2013 Guarantee Criteria--Structured Finance, May 7, 2013 Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Methodology: Credit Stability Criteria, May 3, 2010 European Consumer Finance Criteria, March 10, 2000 Related research Low Interest Rates Are Only Slowly Reviving Europe's Housing Markets, Feb. 5, 2015 The Netherlands 'AA+/A-1+' Ratings Affirmed; Outlook Stable, Nov. 21, 2014 European Structured Finance Scenario And Sensitivity Analysis 2014: The Effects Of The Top Five Macroeconomic Factors, July 8, 2014 Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 Additional Contact: Structured Finance Europe; StructuredFinanceEurope@standardandpoors.com APRIL 14,

27 Copyright 2015 Standard & Poor's Financial Services LLC, a part of McGraw Hill Financial. All rights reserved. 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. 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 acknowledgement 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 nonpublic 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, (free of charge), and and (subscription) and (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 APRIL 14,