Autopia China 2020-1 Retail Auto Mortgage Loan Securitization Trust ABS Assigned Ratings

HONG KONG (S&P Global Ratings) March 17, 2020--S&P Global Ratings today 
assigned ratings to the asset-backed securities (ABS) issued by China Credit 
Trust Co. Ltd. as trustee of Autopia China 2020-1 Retail Auto Mortgage Loan 
Securitization Trust. We assigned 'AAA (sf)' ratings to the class A1 and A2 
notes and a 'BBB- (sf)' rating to the class B notes (see list). The notes are 
backed by a pool of consumer loan contracts secured by passenger vehicles that 
were originated by Beijing Hyundai Auto Finance Co. Ltd. (BHAF).

The ratings reflect the following factors:
  • The credit risk associated with the underlying collateral portfolio and the credit support available are commensurate with our view of credit risk under a 'AAA' rating stress for the class A1 and class A2 notes and 'BBB-' rating stress for the class B notes. 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 and the subordinated notes. The credit support for the class B notes is provided via the subordination of the subordinated notes. In addition, any balance remaining in the liquidity reserve account on the legal maturity of the notes can be applied toward the redemption of the rated notes, providing additional credit support.
  • The transaction's cash flows can meet the timely payment of interest and ultimate payment of principal to holders of the rated notes 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 sequential and turbo repayment structure adopted by the transaction, along with the relatively short tenor and fully amortizing loans, results in a quick accumulation of credit enhancement in percentage terms after the transaction close.
  • 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 about Chinese renminbi (RMB) 50 million through remaining proceeds available on each payment date.
  • If the collateral portfolio experienced a very high constant prepayment rate (CPR), there is a risk that principal collections could be passed through to the class B notes before the scheduled maturity date of the class A1 notes. However, our cash-flow scenario analysis shows that even when we assume a CPR two times as high as our high CPR assumption, principal would not be repaid to the class B notes before the class A1 notes are fully redeemed. We therefore consider this risk to be remote.
  • 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 and Insurance Regulatory Commission and The People's Bank of China's credit assets securitization scheme. The legal structure of the SPT reflects our criteria for insolvency remoteness.
  • The rating on the bank account provider, currently Bank of China Ltd., coupled with the replacement trigger of the bank account provider if the rating on it falls below a certain level, is consistent with our counterparty criteria to support an 'AAA' rated transaction.
  • The ratings on the class A1 and class A2 notes are higher than our sovereign credit rating on China. We applied our "Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions" criteria, published on Jan. 30, 2019. Based on our analysis, the criteria allow a maximum differential of six notches above the sovereign rating. Therefore, the highest rating that can be assigned to this transaction is 'AAA' under our criteria for a rating above the sovereign.
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