Ratings Affirmed On KMU Portfolio, Compartment 2015-1#s Class A To C German ABS Notes Following Transaction Amendments

Stocks and Financial Services Press Releases Thursday April 20, 2017 17:55
MILAN--20 Apr--S&P Global Ratings
MILAN (S&P Global Ratings) April 20, 2017--S&P Global Ratings today affirmed its credit ratings on KMU Portfolio S.A., Compartment 2015-1's class A, B, and C notes (see list below).
On April 12, 2017, akf bank GmbH & Co. KG made the following amendments to the transaction documents:

Extended the revolving period to 56 months and up to a maximum term of April 2020, from 35 months at closing;Changed the concentration limits during the revolving period;Changed the legal final maturity date to be the interest payment date falling in March 2031;Increased the portfolio balance to up to €400 million, funded through the proportional increase of the class A, B, and C notes' balances, while leaving the available credit enhancement unchanged; andIncreased the cash reserve to €4.0 million from €2.5 million, funded through a subordinated loan granted by akf bank. Today's affirmations follow our credit and cash flow analysis of the transaction, taking into account the abovementioned transaction amendments.

Our ratings are based on our applicable criteria, including those set out in the criteria article "European Consumer Finance Criteria," published on March 10, 2000. On April 12, 2017, KMU Portfolio, Compartment 2015-1 increased the class A notes' outstanding issuance amount to €285 million from a closing balance of €195 million, the class B notes' to €44.0 million from €27.5 million, and the class C notes to €21.9 million from €13.7 million to finance the purchase of further receivables. The total portfolio balance is now €373.0 million.

During the 12 months following the restructuring, akf can sell further receivables to reach a maximum portfolio balance of €400 million, financed by increasing the class A notes' issuance amount up to €312.0 million. At the same time, KMU Portfolio, Compartment 2015-1 increased the unrated class D notes' issuance amount to €22.1 million from €13.8 million.

The increase of the subordinated loan by €1.5 million funded the cash reserve increase by the same amount, to €4.0 million. The cash reserve is still 1% of the notes' balance, thus unchanged in relative terms, with the same floor at €0.5 million.

The additional portfolio's main characteristics are similar to those of the existing portfolio.
The concentration limits during the revolving were amended and consequently we have assumed a different worst-case composition.
We also revised and reduced our base-case assumptions compared with those at closing for all of the subpools except boats.
Based on the asset-specific gross default rates and the worst-case portfolio composition during the revolving period, the weighted-average gross default base case is 4.88%, down from 5.55% at closing in 2015.
This accounts for the updated historical information of the originator's portfolio and the transaction's good performance to date.

The stressed default rate in the 'AAA' scenario is driven now by the largest industry concentration of 25% allowed during the revolving period. This differs from the stresses at closing when the actuarial approach (base case multiplied by the rating multiple) was driving the stressed default rate in a 'AAA' scenario.

In our analysis we sized a worst-case recovery base case of 38.25%, up from 30.5% at closing in 2015, leaving the recovery haircut unchanged. This accounts for the historical performance of recoveries.
All other credit assumptions remain unchanged since closing. In our view, the transaction has been performing well since closing. Additionally, it is still in the revolving period.

As of March 2017, 30+ days delinquencies remained low and stable at 0.31%. Cumulative gross and net losses were also low at 1.03% and 0.67%, respectively. Our operational and legal risk analysis is unchanged since closing.

Our ratings on the class A, B, and C notes also reflect that counterparty risks are adequately mitigated through the replacement mechanisms implemented in the transaction documents, in line with our current counterparty criteria (see " Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013).

Taking the abovementioned factors into account, our analysis indicates that the available credit enhancement for the class A, B, and C notes is commensurate with the currently assigned ratings.
We have therefore affirmed our ratings on these classes of notes.

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