BEIJING, September 1, 2022-S&P Global (China) Ratings has assigned its preliminary AAA_spc(sf) ratings to the Silver Arrow China 2022-2 Retail Auto Loan Asset Backed Securities (SAC 2022-2) senior notes of Class A (Class A), to be originated by MBAFC.

We assigned the preliminary rating based on information as of August 5, 2022. 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 (1.10%) and recovery rate (15.00%). After applying the specific stress multiple and recovery haircut, the stressed default and recovery rate are 6.05% and 7.50% 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 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 2%.    

Operational and Administrative Risk: The direct debit payment mechanism will reduce MBAFC’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 agreement given their experience and past track record.

Counterparty Risk: Our assessment of counterparty risk takes into account payment interruption risk, account bank risk and commingling 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 (SPT) 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 Note:  AAA_spc(sf)  

Methodology Applied:  

S&P Ratings China--Structured Finance Methodology  

Related Research:  

Commentary: Understanding Our Approach to China Consumer Asset-Backed Securities  

A Look At China’s Auto ABS Sector 2022 Edition

Model Applied:  

SPG China Ratings Structured Finance Cash Flow Engine  

Media Contacts:

Sharon Tang, Beijing, (86)10-6569-2988; sharon.tang@spgchinaratings.cn

Analyst Contacts:

Enjie Zhang, Beijing;     enjie.zhang@spgchinaratings.cn

Jieqiong Du, Beijing; jieqiong.du@spgchinaratings.cn

Siyue Zhu, Beijing; april.zhu@spgchinaratings.cn

3月楼市迎来“小阳春”行情，行业结构性分化加剧。总体来看，1-3月全国商品房销售额和销售面积累计同比分别下降2.1%和3.0%，降幅较1-2月分别收窄0.5和2.1个百分点。70个大中城市房价指数显示，各线城市房价均有不同程度回暖，新房和二手房价格环比上涨城市数量分别增至24个和10个，较上月增加6个和7个。结构分化主要体现在三方面：

• 城市间K形分化特征愈发凸显，高能级城市独撑“回稳”大局。
• 二手房交易热度强于新房，新房价格回暖主要由改善盘入市支撑。
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• 我们认为，极端关税将对企业投资和家庭消费行为产生非线性影响，即使中国经济对美出口依赖已有所降低，但其对消费、投资带来的间接效应仍将非常广泛。
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• 我们认为需密切关注中小企业的信用质量变化，特别是在纺织、消费电子、家电和汽车零配件等中小企业密集的行业。这些企业的信用质量可能因其客户地域多元化、产业链灵活性及财务抗风险能力不足而更加脆弱。

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