Rating Action: Autopia
China 2020-2 Retail Auto
Loan Backed Securities
Senior Notes Assigned
AAAspc(sf) Preliminary
Ratings S&P Global (China)
Ratings has assigned its
preliminary AAA spc (sf)
ratings to the Class A
and Class B notes of Autopia
China 2020-2 Retail Auto
Loan Backed Securities,
to be originated by Beijing
Hyundai Auto Finance Co.,Ltd.
(BHAF). We assigned the
preliminary rating based
on information as of October
9, 2020. We expect to
assign and publish our
final rating when the
trust becomes effective.
The preliminary rating
reflects our opinions
according to the analysis
of five pillars under
S&P Ratings China--Structured
Finance Methodology. Credit
Quality of the Securitized
Assets: We analyzed the
originator's operational
framework, risk management
and track record, historical
static and dynamic pool
data, aggregated and securitized
assets, and other qualitative
and quantitative factors
to derive our base-case
assumptions which are
further refined by forward-looking
considerations. We have
formed a base-case assumption
of a default rate (1.50%)
and recovery rate (15.00%).
After applying the specific
stress multiple and recovery
haircut, the stressed
default and recovery rate
are 8.25% and 7.50% respectively
under our AAA spc(sf)
rating stress scenario.
Payment Structure and
Cash Flow Mechanics: We
model various combinations
under default timing assumptions,
prepayment rate assumptions,
different triggers and
payment structures, tax,
fees and expenses assumptions.
The Class A and Class
B notes are expected to
be able to withstand stresses
commensurate with the
ratings assigned to the
notes, and still meet
payment obligations in
a timely manner. We estimated
the final S&P Global (China)
Ratings CE buffer to be
greater than 5%. Operational
and Administrative Risk:
The direct debit payment
mechanism will reduce
BHAF’s operational risk
to some extent. Although
there is no back-up servicer,
the upfront cash reserve
can provide liquidity
support to the transaction.
We believe the participants
in this transaction are
capable of fulfilling
the duties and responsibilities
stipulated in the agreements
given their experience
and past track record.
Counterparty Risk: Our
assessment of counterparty
risk takes into account
payment interruption risk,
account bank risk, commingling
risk and set off risk
etc. The transaction documents
have incorporated various
credit quality triggers
to mitigate the abovementioned
counterparty risk. Legal
and Regulatory Risk: This
transaction is structured
in accordance with China's
Trust Law and China Asset
Securitization scheme.
We believe the legal structure
of the special purpose
trust meets the principle
of true sale and bankruptcy
remoteness in securitization.
Through our legal analysis,
the borrower notification,
collateral re-registration
and other legal risks
have been mitigated by
the arrangements stipulated
in the transaction documents.
List of Ratings: Class
A: AAA spc (sf) Class
B: AAA spc (sf) Methodology
Applied: S&P Ratings China--Structured
Finance Methodology Related
Research: Commentary:
Understanding Our Approach
to China Consumer Asset-Backed
Securities China Retail
Auto Loan Market Credit
Performance Outlook 2020
Coronavirus: Understanding
the Known Unknowns Model
Applied: SPG China Ratings
Structured Finance Cash
Flow Engine Media Contacts:
Sharon Tang, Beijing,
(86)10-6569-2988; sharon.tang@spgchinaratings.com
Analyst Contacts: Enjie
Zhang, Beijing; enjie.zhang@spgchinaratings.cn
Jiarong Li,Beijing;jiarong.li@spgchinaratings.cn
Jieqiong Du, Beijing;jieqiong.du@spgchinaratings.cn
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