Press Release

DBRS Morningstar Confirms Rating on Globaldrive Auto Receivables UK 2020-A plc Following Amendment

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June 20, 2022

DBRS Ratings Limited (DBRS Morningstar) confirmed its A (sf) rating on the Class A Notes issued by Globaldrive Auto Receivables UK 2020-A plc.

The rating addresses the timely payment of interest and the ultimate payment of principal by the legal final maturity date.

The transaction is a securitisation of auto loans granted to private and commercial borrowers in the United Kingdom for the purchase of new and used cars and light commercial vehicles. The receivables are originated and serviced by FCE Bank plc (FCE). The transaction is subject to residual value (RV) risk through the presence of personal contract purchase (PCP) agreements.

The confirmation is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the May 2022 payment date.
-- Probability of default (PD), loss given default (LGD), and RV haircut assumptions on a potential portfolio migration based on the past performance analysis.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the A (sf) rating level.
-- No revolving early termination events have occurred.
-- An amendment to the transaction effective on 20 June 2022.

AMENDMENT
The amendment to the transaction involves the following:
-- An extension of the revolving period to the payment date in June 2023 from June 2022.
-- An extension of the legal final maturity date to the payment date in June 2030 from June 2029.
-- An amendment to the fixed leg of the swap agreement to 1.682% from 0.1826% and to the respective swap schedule.
-- An increase in the liquidity reserve balance by GBP 11 million leading to an increase in the required reserve amount to GBP 17,506,250 from GBP 6,506,250. FCE will fund the additional reserve by a non-interest bearing loan and will also provide further loan advances should there be shortfall in the new required reserve amount. The additional reserve and further funding of the reserve will be repaid to FCE in the principal priority of payments after the full repayment of the Class A, Class B, and Class C notes.

PORTFOLIO PERFORMANCE
Delinquencies have been relatively low since the DBRS Morningstar initial rating, except at the August 2020 payment date where a spike occurred in the context of the coronavirus pandemic. As of the May 2022 payment date, (i) the two- to three-month arrears ratio and the 90+ delinquency ratio were marginal at 0.04% and 0.02%, respectively, compared to 0.03% and 0.03%, respectively at the last annual review; (ii) cumulative defaults represented 0.2% of the total purchased receivables since closing, up from 0.1% at the last annual review; (iii) and the residual value represented 57.5% of the outstanding portfolio balance, slightly up from 57.3% at the last annual review.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar maintained its base case PD at 4.4%, its base case LGD at 49.1%, and its residual value haircut at 25.0%, at the A (sf) rating level.

CREDIT ENHANCEMENT
The credit enhancement to the Class A Notes consists of the subordination of the junior notes. As of the May 2022 payment date, the credit enhancement to the Class A Notes was at 17.0%, stable since the initial rating, given that the transaction is still in its revolving period.

The transaction benefits from a nonamortising reserve fund, which covers senior fees, swap payments, and interest on the Class A Notes and is also available to redeem the Class A Notes on the legal final maturity date. As of the May 2022 payment date, the liquidity reserve was funded at its target level of approximately GBP 6.5 million.

Elavon Financial Services DAC, UK branch (Elavon UK) acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of Elavon UK, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Banco Santander S.A. (Santander) acts as the swap counterparty for the transaction. DBRS Morningstar's Long Term Critical Obligations Rating of Santander at “AA (low)” is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/ Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodologies applicable to the rating are “Master European Structured Finance Surveillance Methodology” (19 May 2022) and “Rating European Consumer and Commercial Asset-Backed Securitisations” (29 October 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

DBRS Morningstar has conducted a review of the transaction’s legal documents provided in the context of the aforementioned amendment. A review of any other transaction’s legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings

The sources of data and information used for this rating include loan-level data, investor reports, and the following historical data, all provided by FCE:

-- Static quarterly gross loss data from Q2 2017 to Q1 2022 for voluntary and involuntary terminations.
-- Static quarterly net loss data from Q2 2017 to Q1 2022 for voluntary and involuntary terminations.
-- Static quarterly recovery data from Q2 2017 to Q1 2022 for voluntary and involuntary terminations.
-- Dynamic monthly gross loss data from January 2017 to March 2022 for voluntary and involuntary terminations.
-- Dynamic monthly recovery data from January 2017 to March 2022 for voluntary and involuntary terminations.
-- Dynamic monthly delinquency data from April 2017 to March 2022.
-- Dynamic monthly vehicle handback data from January 2017 to March 2022 for PCP agreements.

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

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

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

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

The last rating action on this transaction took place on 21 June 2021, when DBRS Morningstar confirmed its A (sf) rating on the Class A Notes.

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

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

-- DBRS Morningstar expected a lifetime base case PD, LGD, and RV haircut for a hypothetical migration of the portfolio according to the past performance analysis. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD, LGD, and RV haircut at the A (sf) level of 4.4%, 49.1%, and 25.0%, respectively.
-- The risk sensitivity overview below illustrates the ratings expected if the PD, LGD, and the RV haircut increase by a certain percentage over the base case assumption. For example, if the RV haircut increases by 50%, the rating of the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in both the PD and LGD. If both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the RV haircut. Furthermore, if the PD, LGD, and the RV haircut all increase by 50%, the rating of the Class A Notes would be expected to fall to BBB (sf).

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

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

This rating is endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Natalia Coman, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 26 June 2020

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
Tel. +44 (0) 20 7855 6600
Registered and incorporated under the laws of England and Wales: Company No. 7139960

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

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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