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Citizen Irish Auto 2018 Class B To D Irish ABS Notes Ratings Raised Following Review; Class A Rating Affirmed

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Citizen Irish Auto 2018 Class B To D Irish ABS Notes Ratings Raised Following Review; Class A Rating Affirmed

Overview

  • We have raised our ratings on Citizen Irish Auto Receivables Trust 2018's class B-Dfrd to D-Dfrd notes, and affirmed our rating on the class A notes following our full surveillance review.
  • The transaction is backed by a pool of auto finance receivables originated by First Citizen Finance to its private retail and commercial clients in Ireland.

DUBLIN (S&P Global Ratings) June 10, 2021--S&P Global Ratings today raised its credit ratings on Citizen Irish Auto Receivables Trust 2018 DAC's class B-Dfrd, C-Dfrd, and D-Dfrd notes to 'AA+ (sf)', 'AA (sf)', and 'A- (sf)' from 'AA- (sf)', 'A (sf)', and 'BBB (sf)', respectively. At the same time, we have affirmed our 'AAA (sf)' rating on the class A notes.

Today's rating actions follow our full review of the transaction's credit, cash flow, counterparty, and operational risks under our relevant criteria (see "Related Criteria").

Since closing in December 2018, the collateral performance has been strong and stable. Total assets 30 to 120+ days past due were at 1.44% as of March 2021, and cumulative defaults since entering amortization were at 0.81% of the closing collateral balance. The pool has been amortizing quickly since the revolving period ended in December 2019, with the pool factor at 47.3% in March 2021.

In view of the transaction's strong observed performance since closing and the fast pace of amortization, we have lowered our expected base-case default rate on the underlying pool to 4.5% from the 5.5% assumption applied at our previous review. However, within this assumption we have also considered the potential effect of COVID-19 on the credit performance, along with our current expectations of Ireland's macroeconomic economic outlook. We also reduced our credit multiple at all rating levels reflecting increased availability of actual pool performance and shorter time to maturity (for example, to 4.9x from 5.0x at the 'AAA' rating).

Our recovery, balloon loss, and residual value loss assumptions remain at the original levels.

Since the end of the revolving period, the available credit enhancement for all rated classes of notes has increased due to collateral amortization. The liquidity reserve remains at its required level.

We have performed our cash flow analysis to test the effect of the amended credit assumptions and deleveraging in the structure. Although our base-case default assumption declined, to test the potential effect of COVID-19, we have applied additional stresses, such as extending the recovery timing by an additional six months.

Our credit and cash flow analysis indicates that the available credit enhancement for the class B-Dfrd, C-Dfrd, and D-Dfrd notes is commensurate with higher ratings than those currently assigned. We have therefore raised our ratings on these classes of notes. The rating assigned for the class B-Dfrd notes also considers the deferrable nature of the notes. We have also affirmed our 'AAA (sf)' rating on the class A notes.

Given that the class B-Dfrd, C-Dfrd, and D-Dfrd notes are interest deferrable notes, our ratings on these classes address the ultimate payment of interest and principal, until the notes become the most senior outstanding. Our rating on the class A notes addresses the timely payment of interest and ultimate payment of principal.

There are no rating constraints under our operational risk, counterparty, or structured finance sovereign risk criteria, and legal risks continue to be adequately mitigated, in our view.

As vaccine rollouts in several countries continue, S&P Global Ratings believes there remains a high degree of uncertainty about the evolution of the coronavirus pandemic and its economic effects. Widespread immunization, which certain countries might achieve by midyear, will help pave the way for a return to more normal levels of social and economic activity. We use this assumption about vaccine timing 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.

The transaction is backed by a pool of auto finance receivables originated by First Citizen Finance DAC to its private retail and commercial clients in Ireland. The pool predominantly comprises consumer hire-purchase agreements plus a relatively smaller proportion of commercial hire-purchase, acquisition lease, and contract hire agreements.

Related Criteria

Related Research

Primary Credit Analyst:Sinead Egan, Dublin + 353 1 568 0612;
sinead.egan@spglobal.com

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