S&P: Autopia China 2016-2 Retail Auto Mortgage Loan Securitization Trust Assigned Ratings
This is the second auto loan securitization transaction originated by BHAF. The ratings assigned to the notes issued by Autopia China 2016-2 Retail Auto Mortgage Loan Securitization Trust reflect:The credit risk associated with the underlying collateral portfolio and the credit support available are commensurate with our view of credit risk under 'AA' and 'A-' rating stresses. Our assessment of credit risk takes into account originator BHAF's underwriting standards and centralized approval process, which are largely consistent with parent company Hyundai Capital Services Inc.'s global practice and risk management approach, with some local adaptation. The credit support for the class A1 and class A2 notes is provided via the subordination of the class B notes, the subordinated notes, the liquidity reserve (equivalent to 1% of initial pool balance), and excess spread, if any. Credit support for the class B notes includes the subordination of the subordinated notes, the liquidity reserve, and excess spread, if any. Any losses on the collateral pool will firstly be covered by excess interest collections from the loans after paying senior expenses and rated note coupon via a turbo principal repayment mechanism, followed by the loss absorption of subordinated notes, then any remaining balance of the liquidity reserve account on the maturity date of the notes. The transaction's cash flows can meet the timely payment of interest and ultimate payment of principal to the rated noteholders under stresses commensurate with the ratings assigned. All rating stresses are assessed on the basis that the issuer does not call the notes on or beyond the call-option threshold date, and that the notes must be fully redeemed via the mechanisms under the transaction documents. The timely payment of senior expenses and rated note coupon is supported by the use of interest and principal collections from the underlying pool of loans and a liquidity reserve equal to 1.0% of the initial receivables balance. The liquidity reserve will not amortize and will be topped up to a floor of around Chinese renminbi (RMB) 30 million through excess spread to the extent available, on each payment date. The legal structure of the trust, established as a special-purpose trust (SPT) under China's Trust Law, and the transaction structure and terms, are consistent with the governance of China Banking Regulatory Commission (CBRC) and The People's Bank of China (PBOC)'s credit assets securitization (CAS) scheme. The legal structure of the SPT reflects our criteria for insolvency remoteness. Our ratings also reflect the counterparty exposure to China Merchants Bank Co. Ltd. as a bank account provider. The rating on the bank account provider, coupled with the replacement trigger of the bank account provider if its rating falls below a certain level, is consistent with our "Counterparty Risk Framework Methodology And Assumptions" counterparty criteria, published on June 25, 2013.