Overview
- We have reviewed Silver Arrow S.A., Compartment 10's performance by conducting our analysis of the transaction's underlying assets and structural features.
- Following our review, we raised our ratings on the class C-Dfrd and D-Dfrd notes.
- At the same time, we affirmed our ratings on the class A and B-Dfrd notes.
- This is an ABS transaction of German auto loans originated by Mercedes-Benz Bank AG, which closed in July 2019.
FRANKFURT (S&P Global Ratings) Feb. 8, 2022--S&P Global Ratings today raised to 'AA (sf)' from 'A (sf)' its credit rating on Silver Arrow S.A., Compartment 10's class C-Dfrd notes. At the same time, we raised to 'A- (sf)' from 'BBB- (sf)' our rating on the class D-Dfrd notes, and affirmed respectively our 'AAA (sf)' and 'AA+ (sf)' ratings on the class A and B-Dfrd notes.
While our rating on the class A notes addresses the timely payment of interest and the ultimate payment of principal, our ratings on the class B-Dfrd to D-Dfrd notes address the ultimate payment of principal and the ultimate payment of interest. Furthermore, there is no compensation mechanism that would accrue interest on deferred interest in this transaction.
Today's rating actions follow our review of the transaction's performance and the application of our current criteria, and reflect our assessment of the payment structure according to the transaction documents (see "Related Criteria").
The transaction closed in July 2019 and immediately began to amortize (see "New Issue: Silver Arrow S.A., Compartment 10," published on July 22, 2019). The pool balance has declined to €287,1 million as of the December 2021 payment date from €1,250.0 million at closing, bringing the current pool factor (the outstanding collateral balance as a proportion of the original collateral balance) to approximately 23%. The liquidity reserve remains funded at the target level of €6.375 million. The fully sequential repayment of principal has reduced the class A notes' balance to €199.6 million from €1,162.5 million in July 2019, resulting in increased credit enhancement of 32.7% for this class of notes, compared with 7.51% at closing. Similarly, the available credit enhancement for the class B-Dfrd, C-Dfrd, and D-Dfrd notes has increased to 13.89%, 7.77%, and 3.86%, respectively, from 2.80%, 1.40%, and 0.5% over the same period.
We have analyzed credit risk under our European auto ABS criteria, using the transaction's historical gross loss data (see "Criteria | Structured Finance | ABS: Methodology And Assumptions For European Auto ABS," published on Oct. 15, 2015). In our view, Silver Arrow 10 has shown stable asset performance, with cumulative gross losses generally performing better than our assumptions at closing and also better than our assumptions during our last full review. As a result, we have decreased our base-case gross loss assumption to 1.3% from 1.5%. Additionally, we maintained our recovery rate of 42% for investment grade rating levels and of 45% for non-investment-grade rating levels.
Table 1
Credit Assumptions | |
---|---|
Parameter | Current |
Gross loss base case (%) | 1.3 |
Gross loss multiple ('AAA') | 4.5 |
Gross loss multiple ('AA+') | 4 |
Gross loss multiple ('AA') | 3.5 |
Gross loss multiple ('A-') | 2.25 |
Stressed recovery rate at investment-grade ratings (%) | 42 |
Stressed recovery rate at speculative-grade ratings (%) | 45 |
Balloon loss ('AAA') (%) | 7.5 |
Balloon loss ('AA+') (%) | 6.75 |
Balloon loss ('AA') (%) | 6 |
Balloon loss ('A-') (%) | 3 |
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 and swap counterparty (Elavon Financial Services DAC and Royal Bank of Canada respectively) up to a 'AAA' rating.
Our analysis indicates that the available credit enhancement for the class A, B-Dfrd, C-Dfrd, and D-Dfrd notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA', 'AA+', 'AA', and 'BBB-' rating levels, respectively.
Related Criteria
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- 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
- 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: Methodology And Assumptions For Market Value Securities, Sept. 17, 2013
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009
Related Research
- European Auto ABS Index Report Q3 2021, Dec. 14, 2021
- European Economic Snapshots Q4 2021: From Fast-Paced Recovery To Robust Expansion, Dec. 6, 2021
- What's It Worth? The Rise Of Electric Vehicles In European Auto ABS, Nov. 30, 2021
- S&P Global Ratings Definitions, Nov. 10, 2021
- ESG Industry Report Card: Auto Asset-Backed Securities, March 31, 2021
- 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
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- Scenario Analysis: Gross Default Rates And Excess Spread Hold The Answer To Future European Auto ABS Performance, May 12, 2009
Primary Credit Analyst: | Roberto Amato, Frankfurt + 49 69 3399 9161; roberto.amato@spglobal.com |
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