DBRS Confirms Ratings on E-CARAT 6 plc

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the Class A Notes and Class B Notes (the Notes) issued by E-CARAT 6 plc (the Issuer) at AAA (sf) and AA (low) (sf), respectively.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the March 2017 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement for the Class A Notes and Class B Notes to cover the expected losses at the AAA (sf) and AA (low) rating levels, respectively.
-- Ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.

The ratings on the Class A Notes and Class B Notes address timely payment of interest and ultimate payment of principal by the legal maturity date.

E-Carat 6 plc is a securitisation of receivables related to motor vehicle loan contracts originated and serviced by GMAC (UK) plc. E-CARAT 6 plc is subject to the UK Consumer Credit Act provisions on consumer financing. The relevant contracts were granted to private and commercial customers for the purchase of used or new vehicles. Part of the underlying loan contracts are personal contract purchases with a final balloon payment that envisages the borrower’s option to turn in the purchased vehicle at contract maturity as an alternative to repaying the final balloon.

As of 20 March 2017, the balance of the Class A Notes was GBP 205.8 million and the balance of the Class B Notes was GBP 29.6 million. The outstanding total balance on the securitised portfolio is GBP 257.9 million (excluding defaulted receivables).

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS’s initial expectations. The delinquency ratios have been stable since closing. As of the March 2017 payment date, loans more than 90 days delinquent (excluding defaulted loans), as a percentage of the outstanding portfolio collateral balance, are 0.06%. The gross cumulative defaulted loans (including liquidated and voluntarily terminated receivables), as a percentage of the original portfolio, are at 0.37%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool and updated the probability of default (PD) and LGD assumptions on the remaining collateral pool to 3.12% and 52.17%, respectively.

CREDIT ENHANCEMENT
As of 20 March 2017, credit enhancement (CE) available to the Class A Notes and Class B Notes are 20.21% and 8.73%, respectively. The source of CE is provided through portfolio overcolleralisation.

The transaction benefits from a Liquidity Reserve equal to 1.2% of the principal outstanding balance of the Notes and amortises at a floor of GBP 200,000. The Liquidity Reserve provides liquidity support and is available to cover senior fees and any interest shortfall on the Notes. The Liquidity Reserve is currently at its target amount of GBP 2.8 million

Elavon Financial Services DAC, U.K. Branch acts as Account Bank for this transaction. The DBRS private rating of Elavon Financial Services DAC, U.K. Branch complies with the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Royal Bank of Canada, London branch is the Swap Counterparty of the transaction and its DBRS rating is above the First Rating Threshold for a Swap Counterparty, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in GBP unless otherwise noted.

The principal methodology applicable to the rating is: “Master European Structured Finance Surveillance Methodology”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of data and information used for this rating include investors report provided by U.S. Bank Trustees Limited and loan-by-loan data from the European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or the information it receives in connection with the rating process.

The last rating action on this transaction took place on 18 April 2016 when DBRS finalised the provisional ratings assigned to the Class A Notes at AAA (sf) and Class B Notes at AA (low) (sf).

The lead analyst responsibilities for this transaction have been transferred to Antonio Di Marco.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (base case):

-- The base case PD and LGD of the current pool of mortgages for the Issuer are 3.12% and 52.17%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to be at AA (high) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 15 March 2016

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375