TEXT-S&P rates Bavarian Sky’s Compartment 3 German auto ABS issue

Credit Risk

We have used performance data from BMW Banks leasing portfolio and from
previous transactions to analyze credit risk. We expect to see about 3% of
defaults in the securitized pool. In comparison to Bavarian Sky SAs
Compartment 2, we reduced our baseline expectations to reflect our assumption
of a continued stabilization of the German economy, as well as our view of the
effects of certain operational changes that BMW Bank has made in its
origination and servicing processes in the past few years. We have analyzed
credit risk by applying our European consumer finance criteria (see European
Consumer Finance Criteria, published on March 10, 2000).

Sequential Payment Structure

Our ratings on the class A and B notes reflect our assessment of the
transactions payment structure set out in the transaction documents. The
credit enhancement would build up quickly in our base line scenario due to the
sequential payment structure, the utilization of all excess cash to pay down
notes from the beginning of the amortization period, and the non-amortizing
cash reserve. Our analysis indicates that the credit enhancement available to
the class A notes is sufficient to withstand the credit and cash flow stresses
that we apply at a AAA rating level. The credit enhancement available to the
class B notes is sufficient to withstand the credit and cash flow stresses
that we apply at a A+ rating level.

Counterparty Risk

Our ratings on the class A and B notes also consider that the replacement
mechanisms implemented in the transaction documents adequately mitigate the
counterparty risks that the transaction is exposed to. The transaction is
exposed to BNP Paribas Securities Services (AA-/Negative/A-1+) as account
bank, DZ Bank AG Deutsche Zentral-Genossenschaftsbank (AA-/Stable/A-1+) as
swap counterparty. We have analyzed these counterparty risks by applying our
counterparty criteria (see Counterparty Risk Framework Methodology And
Assumptions, published on May 31, 2012).

Legal Risk

In our opinion, the transaction may be exposed to deposit set-off risks,
residual trade tax risks, and commingling risk. Reserves that are funded at
closing fully mitigate the tax and commingling risks. A reserve that is funded
once set-off exposure exceeds 1% of the transaction volume only partially
mitigates set-off risk. We have sized the unmitigated exposure as an
additional loss. We have also analyzed potential set-off and termination risks
in contracts with servicing components, and found the risk to be negligible.

Rating Stability

In our review, we have analyzed the effect of a moderate stress on the credit
variables and their ultimate effect on the ratings on the notes (see Scenario
Analysis: Gross Default Rates And Excess Spread Hold The Answer To Future
European Auto ABS Performance, published on May 12, 2009). We have run two
scenarios and the results are in line with our credit stability criteria (see
Methodology: Credit Stability Criteria, published on May 3, 2010).

RELATED CRITERIA AND RESEARCH

– New Issue: Bavarian Sky SA, Compartment 3, July 18, 2012

– Counterparty Risk Framework Methodology And Assumptions, May 31, 2012

– No Fast Lane Out Of Europes Recession, April 4, 2012

– European Structured Finance Scenario And Sensitivity Analysis: The
Effects Of The Top Five Macroeconomic Factors, March 14, 2012

– Global Structured Finance Scenario And Sensitivity Analysis: The
Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011

– Principles Of Credit Ratings, Feb. 16, 2011

– Methodology: Credit Stability Criteria, May 10, 2010

– New Issue: Bavarian Sky SA, Compartment 2, Feb. 23, 2010

– Scenario Analysis: Gross Default Rates And Excess Spread Hold The
Answer To Future European Auto ABS Performance, May 12, 2009

– European Legal Criteria For Structured Finance Transactions, Aug. 28,
2008

– A Listing Of SPs New Actions Aimed At Strengthening The Ratings
Process, Feb. 7, 2008

– European Consumer Finance Criteria, March 10, 2000

– European Auto ABS Index Report, published quarterly

RATINGS LIST

Bavarian Sky SA, Compartment 3

EUR800 Million Asset-Backed Floating-Rate Notes

Class Rating Amount

(mil.)

A AAA (sf) 769.6

B A+ (sf) 30.4

We can easily supply you with a low price auto loan where you live with no need of you having to drive the car across town.

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