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Pearl Finance 2020 DAC Euro CMBS Class A2 To E Ratings Raised; Class A1 Affirmed


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Pearl Finance 2020 DAC Euro CMBS Class A2 To E Ratings Raised; Class A1 Affirmed


  • We have reviewed the performance of Turbo Finance 9 by conducting our credit and cash flow analysis and applying our relevant criteria.
  • Following the considerable transaction amortization, we raised our ratings on all classes of notes.
  • The collateral for this auto ABS transaction comprises fixed-rate auto loan receivables granted to commercial and private borrowers resident in the U.K. for the purchase of used and new vehicles (including motorcycles, scooters, and light commercial vehicles).

LONDON (S&P Global Ratings) Sept. 28, 2023--S&P Global Ratings today raised its credit ratings on Turbo Finance 9 PLC's class B notes to 'AAA (sf)' from 'AA+ (sf)', class C-Dfrd notes to 'AA+ (sf)' from 'A (sf)', class D-Dfrd notes to 'AA (sf)' from 'A- (sf)', and class E-Dfrd notes to 'A (sf)' from 'BB- (sf)'.

The transaction has amortized sequentially since August 2021, the end of a nine-month revolving period (see "New Issue: Turbo Finance 9 PLC," published on Oct. 8, 2020). This has resulted in increased credit enhancement for the outstanding notes. As of the August 2023 servicer report, the pool factor has declined to 13.4%, and the available credit enhancement for the class B, C-Dfrd, D-Dfrd, and E-Dfrd notes had increased to 93.4%, 55.1%, 39.8%, and 20.6%, respectively, from 11.9%, 6.9%, 4.9%, and 2.3% at closing.

The repayment of the notes was accelerated in September 2023, following the repurchase of receivables by the seller, MotoNovo Finance Ltd. (MNF). Following MNF's review of its internal servicing and origination processes, it determined that receivables with an aggregate outstanding principal of £49.8 million were required to be repurchased. At the time of sale to Turbo Finance 9, the repurchased receivables were either in breach of a representation given by MNF denoted in the receivables purchase agreement or subsequently became no longer STS (simple, transparent, and standardized) or LCR (liquidity coverage ratio) compliant receivables. The seller therefore exercised its documented option to repurchase such receivables. As a result of the repurchase, the class A notes were fully repaid and available credit enhancement to the remaining notes further increased.

The level of losses recorded--hostile termination (HT) and voluntary termination (VT)--are lower than forecast at closing and at our previous review (see "Turbo Finance 9 PLC Class B Rating Raised; All Other Classes Affirmed," published Sept. 22, 2022). Combined with a reduced remaining collateral balance, we have lowered our HT gross loss base-case assumptions to 2.0% from 4.0%. We have lowered our VT base case to 0.5% from 1.1%. The loss multiples remain unchanged.

The reported cumulative recovery rates are currently significantly below our expectations at closing. Following the pandemic, the originator conducted a review of the arrears management processes, which led to the slowdown of their recovery process. As the actions taken have not yet seen a resultant improvement in the level of recoveries being generated in the transaction, we have lowered the base recovery rate assumption to 10%.

Credit Assumption Summary (AAA)
Current review (%) September 2022 review (%)
Base-case cumulative HT rate assumption (%) 2.0 4.0
Base-case cumulative VT rate assumption (%) 0.5 1.1
HT stress multiple 4.7 4.7
VT stress multiple 3.0 3.0
Stressed cumulative recovery (%) 7.5 27.6
RV loss exposure percentage of the total pool 14.9 13.1
RV loss (%) 30.3 29.0
HT--Hostile terminations. VT--Voluntary terminations. RV--Residual value.

Our cash flow analysis indicates that the available credit enhancement for the class B, C-Dfrd, D-Dfrd, and E-Dfrd notes in this transaction is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA', 'AA+', 'AA', and 'A' rating levels, respectively. The class C-Dfrd, D-Dfrd, and E-Dfrd notes achieve higher cash flow outputs under our standard cash flow analysis. However, the assigned ratings on these classes of notes also take into consideration their relative level of subordination and various sensitivity scenarios.

Operational, counterparty, and legal risks continue to be adequately mitigated, in our view, and do not constrain our ratings on the notes.

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Primary Credit Analyst:James Gayer, London 20-7176-3657;

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