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Press Release: S&PGR Report: German Diesel Ban May Impact Auto ABS

28 Feb 2018 10:38 am
 
 
The following is a press release from S&P Global Ratings: 
 
OVERVIEW 
     -- Following a high court ruling, we believe major German cities will 
this year start banning heavily polluting diesel vehicles. 
     -- We expect this to accelerate the phase-out of diesel and further cut 
the resale value of used diesel vehicles. 
     -- Diesel bans could weaken the collateral performance of German auto 
asset-backed securities (ABS) transactions. 
     -- They would also add further pressure on residual values of leased 
assets at German carmakers' captive finance operations. 
 
FRANKFURT (S&P Global Ratings) Feb. 28, 2018--A German ruling to allow bans on 
diesel cars in cities could weaken the collateral performance of German auto 
asset-backed securities (ABS transactions), says S&P Global Ratings in a 
report published today ("German Diesel Ban Brings Bad Air For Carmakers And 
Auto ABS"). It will also add pressure to German carmakers' captive finance 
operations. 
 
"Although we don't yet know the scope of the potential diesel bans, we expect 
the higher court ruling, as well as car buyers' deepening uncertainty, may 
constrain the marketability of used diesel vehicles in the next few months, 
and consequently weaken the collateral performance of German auto ABS 
transactions," said S&P Global Ratings credit analyst David Tuchenhagen. 
 
S&PGR analysts estimate that up to 40% of diesel vehicles in rated German auto 
lease ABS transactions could be non-compliant with the latest Euro 6 emissions 
standard. Auto ABS transactions are typically indirectly exposed to residual 
value (RV) risk, while some are exposed to direct RV risk. 
 
"As we gain a better understanding of the scope of the potential diesel bans 
and their impact on resale values, we will assess whether, if, and when we 
consider an adjustment of our market value decline assumptions to be 
warranted," said Mr. Tuchenhagen. 
 
For German carmakers' captive finance operations, in the short term we expect 
a further decline in diesel resale values will be partially mitigated by an 
increase in petrol resale values, resulting in a moderate overall decline in 
the value of leased assets," said S&P Global Ratings credit analyst Vittoria 
Ferraris. "However, given that bans reinforce the negative sentiment about 
diesel, we see a growing risk that automakers may need to make provisions, 
especially if the decline in used diesel car prices becomes more rapid." 
 
Only a rating committee may determine a rating action and this report does not 
constitute a rating action. 
 The report is available to subscribers of RatingsDirect at www.capitaliq.com. 
 If you are not a RatingsDirect subscriber, you may purchase a copy of the 
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research_request@spglobal.com. Ratings information can also be found on the 
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following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; 
London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 
69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4009. 
 
Primary Credit Analysts: David Tuchenhagen, Frankfurt +49 69-33-999-307; 
                         david.tuchenhagen@spglobal.com 
                         Vittoria Ferraris, Milan (39) 02-72111-207; 
                         vittoria.ferraris@spglobal.com 
Secondary Contacts: Roberto Paciotti, Milan (39) 02-72111-261; 
                    roberto.paciotti@spglobal.com 
                    Volker Laeger, Frankfurt (49) 69-33-999-302; 
                    volker.laeger@spglobal.com 
                    Alex P Herbert, London (44) 20-7176-3616; 
                    alex.herbert@spglobal.com 
Additional Contact: Structured Finance Europe; 
                    StructuredFinanceEurope@spglobal.com 
 
 
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(END) Dow Jones Newswires

February 28, 2018 05:38 ET (10:38 GMT)
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