European Securitized Products Weekly - WikiLeaks Securitized Products Weekly 7 October 2011 3 Citigroup Global Markets We reiterate our European auto ABS overweight recommendation,

Citi Investment Research & Analysis is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Citigroup Global Markets

Europe

7 October 2011 │ 28 pages

European Securitized Products Weekly Auto ABS Survey — A Road Trip Through Europe

Drive My Car — The European Auto ABS sector is one of our core overweight recommendations, and we like the senior and subordinate classes. Senior spreads range from EURIBOR +70-135bp with an average WAL of 1.25. The sector is high quality, short and rolls down the curve.

Subordinate Value — Subordinate spreads offer significant pickups over senior classes and are still well protected, according to our analysis. Spreads range from EURIBOR +165-275bp, a pickup of 95-140bp over senior classes. They are also short in duration and some transactions are “sub friendly”, paying pro-rata with the senior notes.

Under the Hood — Seven auto ABS structures we examined can withstand from 7.5-126.5 times average trust losses, evidencing significant loss protection (at 70% loss severity), according to our stress analysis. Senior class breakeven CDRs range from 14.3-44.9%, and subordinate class breakeven CDRs range from 4.8-15.2% at the same severity, subject to our assumptions.

Strong Enhancement — Senior credit enhancement ranges from 8.6-16.0% for the eight representative transactions we examined. Senior tranches benefit from amortization and credit enhancement accretion. Subordinate credit enhancement typically consists of a reserve fund or subordinate loan, providing 1.6-6.0% of subordinate credit enhancement.

Autobahn Stars — German collateral performs best among the observed transactions. Santander, Ford and GMAC exhibit the best loss coverage multiples at similar seasoning levels. Peugeot’s Italian COMP shelf displays the weakest coverage multiples, but is still well covered at 7.5 times in a severe loss scenario.

Securitized Products

See Appendix A-1 for Analyst Certification, Important Disclosures and non-US research analyst disclosures.

Gordon W Kerr +44-20-7986-1998 [email protected]

Himanshu Shrimali, CFA [email protected]

Ramanan V [email protected]

European Securitized Products Weekly 7 October 2011

Citigroup Global Markets 2

A Smooth Drive Over Rough Roads 3 Deal Characteristics 3

Stress Results Reveal Elevated Breakeven Coverage 6 Loss Coverage Multiples Demonstrate Resilience 7

Auto Loan Structural Overview 8 Summary — Strength and Stability Offer Good Value 8 Appendix – Stress Methodology and Assumptions 9

Stress Scenarios 9 The Week Ahead 12

Critical Events Calendar 12 Securitization New Issue Markets 13 Collateral Summary 15 Upcoming Investor Reporting Dates 16 Relative Value Charts 18 Rating Actions and Trends 20 Appendix A-1 25

Contents



We reiterate our European auto ABS overweight recommendation, which looks a good foil for the recent rough ride in the equity and credit markets. In particular, the sector’s short duration and high quality collateral offer good protection, and the sector is a strong sovereign alternative for cash investments. Auto ABS spreads range from EURIBOR +70-135bp for senior bonds and 165-275bp for subordinate bonds. In this report, we examine a representative selection of large, auto ABS programs across different regions, comparing credit enhancement, collateral and performance. We do this to give a broad picture of the sector — we make no recommendations in respect of any individual program. We also conduct stress tests to estimate loss protection. Some highlights from our analysis reveal:

High Quality, Short Duration. The underwriting standards for European auto ABS are strong, and loss levels are low. Rapid amortization of the loan collateral provides for short weighted average lives.

Strong Senior Breakevens. According to our analysis, senior classes we examined can withstand elevated breakeven rates ranging from 14.3-44.9% assuming 70% loss severity. The large breakeven rates are many multiples of current CDRs, affording strong senior class protection.

Subordinate Strength. Subordinate classes also demonstrate strong breakeven capacity, according to our stress analysis. Subordinate breakeven CDRs range from 4.8-15.2% at 70% loss severity. The results evidence that coverage of current and historical CDRs is also strong.

High Credit Enhancement. Credit enhancement at origination ranges from 8.6-16.0% and sequential amortization structures continue to build enhancement. Subordinate enhancement levels range from 1.6-8.5%, supported by reserve funds and overcollateralization.

Deal Characteristics

We chose transactions covering a variety of regions and originators for our analysis in order to capture a representative picture of the auto market. We briefly summarize the transactions as follows:

Collateral Variation. We include transactions from the regions of France, Germany, Italy and Spain. Originators include two large US auto manufacturers (GM & Ford), two European manufacturers (VW and Peugeot), and one non-captive originator (Santander). We provide a quick summary of the transactions below:

– GLDR 2010-A. The vehicles backing the loans from this issuer are manufactured by Ford and FCE Bank is the captive originator of the deals. This particular deal has a portfolio of auto loans to German individuals (98.2%) and commercial borrowers (1.8%). New vehicles account for 88.3% of collateral and used vehicles, 11.7%.

– ECAR 2010-1. GMAC Bank GmbH is the originator of these loans for GM vehicles to its customers in Germany. This transaction consists of loans to private individuals (84.1%) and corporate borrowers (15.9%). The pool contains 87.0% balloon loans.

– SCGA 2010-1. Santander Consumer Bank originates the loans under the SCGA program. Santander is a non-captive originator with loans to private individuals based in Germany. Only 15.6% of the portfolio contains balloon loans.

A Smooth Drive Over Rough Roads

The auto ABS sector offers significant

credit protection. The breakeven CDRs

are many multiples of long-term losses.



– DRVON 7. Volkswagen Bank GmbH initiates the loans under the Driver program. The portfolio consists of loans in Germany to retail (81.19%) and corporate (18.8%) customers and 82.7% of the loans are balloon loans.

– DRVES 2011-1. The first deal from Volkswagen Finance with Spanish loan origination to individuals and corporations. Only 7.2% of the portfolio consists of balloon loans.

– COMP 2007-1 / 2007-2. Banque PSA Finance and Credipar are captive originators for Peugeot SA. In contrast to the other ABS structures, these two transactions uniquely began as revolving collateral pools and started amortizing in 2010. The COMP 2007-1 contains loans to individuals in France, and COMP 2007-2 contains loans to customers in Italy.

Balloon Loans. Certain European auto ABS transactions contain large balloon loan exposures. Nonetheless, the borrowers are prime and the credit performance is good. Pools with large concentrations of balloon loans are German, while balloon concentrations are small for French, Spanish and non-captive German transactions.

Balloon concentrations. German balloon loan exposures range from 82.7-91.8% in the observed deals. Whereas, Italian, French, Spanish and non-captive German transactions range from 2.0-15.6% (Figure 1).

Balloon strategy. The inclusion of balloon loans is a targeted originator strategy to promote new vehicle turnover. Balloon loan contracts typically contain a put option to sell the vehicle back to the dealer at a pre-agreed price. However, the trust does not absorb the residual price risk. When the large balloon payment approaches, the dealer typically offers to switch the borrower into a new car for a similar payment level, assuming the value of the car has not fallen below the pre-agreed price,

Balloon performance. We find that this type of loan experiences no higher losses than is typical for prime auto loans, due to the higher quality of borrower. As Figure 2 shows, all DRVON transactions issued from 2004–2011 which contain elevated balloon loan exposures demonstrate very low cumulative loss levels (roughly 50bp or less).

Figure 1. Level of Balloon Loan Exposure Across Transactions (%) Figure 2. DRVON Weighted Average Cumulative Loss Levels (%, months)

91.8%87.0%

82.7%

15.6%

7.2%3.5% 2.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GLDR 2010-A ECAR 2010-1 DRVON 7 SCGA 2010-1 DRVES 2011-1 COMP 2007-2 COMP 2007-1

% Balloon Loans

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68

DRVON 1 DRVTW DRVON 3 DRVON 4 DRVON 5

DRVON 6 DRVON 7 DRVON 8

Source: Investor Reports and Citi Investment Research and Analysis Source: ABS Net and Citi Investment Research and Analysis



Low CDR Levels. The CDRs for the selected transactions are relatively low with the exception of two COMP transactions. CDRs range from 0.00-0.46% for five of the selected transactions. The COMP CDRs are much higher — 5.01% and 1.97% for COMP 2007-2 and COMP 2007-1, respectively, reflecting a poorer quality pool composition (Figure 3).

Figure 3. CDR Curves for Selected Transactions, By Seasoning (%, months)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

1 5 9 13 17 21 25 29 33 37 41 45 49

DRVON 7 ECAR 2010-1 GLDR 2010-A SCGA 2010-1

DRVES 2011-1 COMP 2007-2 COMP 2007-1

Source: ABS Net, Moody’s and Citi Investment Research and Analysis

Low Delinquency Levels. European auto ABS 60d+ delinquency levels are low,

ranging from 0.10-1.74%. The Italian transaction, COMP 2007-2 has the highest delinquency (1.72%), whereas the remaining transactions report levels below 0.65% (Figure 4).

Figure 4. 60d+ Delinquency Curves for Selected Transactions, By Seasoning (%, months)

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55

DRVON 7 ECAR 2010-1GLDR 2010-A SCGA 2010-1DRVES 2011-1 COMP 2007-2COMP 2007-1

Source: ABS Net, Moody’s and Citi Investment Research and Analysis



CPR Variability. The transactions we selected report large CPR variations. COMP 2007-1 and SCGA 2010-1 register high CPRs over 15%, while transactions such as DRVON and DRVES CPRs are below 1.0% (Figure 5). We attribute the variability to loan composition differences – balloon loan pools exhibit generally slower CPRs than pools containing amortizing loans.

Figure 5. Characteristics of Select Auto Transactions, October 2011 Deal Country Originator Original Pool

Size (€ million) Current Factor CPR CDR 60d+ Delinq. Cumulative

Net Loss COMP 2007-1 France Credipar (Peugot) 1,250.0 0.315 15.33% 1.97% 0.64% 0.89% GLDR 2010-A Germany FCE Bank (Ford) 529.5 0.797 3.77% 0.09% 0.18% 0.06% ECAR 2010-1 Germany GMAC (GM) 507.5 0.788 6.04% 0.46% 0.10% 0.09% SCGA 2010-1 Germany Santander 600.0 0.647 15.10% 0.20% 0.14% 0.00% DRVON 7 Germany Volkswagen 519.1 0.649 0.31% 0.30% 0.39% 0.07% COMP 2007-2 Italy Banque PSA (Peugot) 868.7 0.569 6.52% 5.01% 1.72% - DRVES 2011-1 Spain Volkswagen 659.9 1.000 0.24% 0.00% 0.14% 0.00%

Source: ABS Net and Citi Investment Research and Analysis

Stress Results Reveal Elevated Breakeven Coverage

Our analysis reveals that even in our 70% loss severity scenario, senior auto loan classes we examined can withstand very high breakeven CDRs (refer to Appendix for detailed assumptions). Subordinate classes also stand up well in the same severe scenario. We summarize our findings as follows:

Difficult to Break. Breakeven CDRs for the senior classes range from 14.3-44.9% at 70% severity. These breakeven CDRs compare favorably to the current CDRs, which range from 0.09-5.01%, in the transactions we selected. We solve for the maximum CDR the transaction can withstand before experiencing a unit of loss, subject to our assumptions (Figure 6).

Strong Mezzanine. Breakeven CDRs for junior classes of notes range from 4.8-15.2%. The ECAR 2010-1 transaction demonstrates the weakest subordinate breakeven levels, with 4.8% at 70% loss severity. Amortization of the COMP 2007-1 transaction helps the subordinate class to withstand high breakeven CDR levels of 15.2% in a 70% loss severity scenario (Figure 7).

Figure 6. Senior Auto ABS Breakeven CDRs Figure 7. Subordinate Auto ABS Breakeven CDRs

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

COMP2007-1

ECAR2010-1

SCGA2010-1

GLDR2010-A

DRVES2011-1

COMP2007-2

DRVON 7

LS=40% LS=50% LS=70%

0%

5%

10%

15%

20%

25%

30%

COMP2007-1

SCGA2010-1

DRVES2011-1

DRVON 7 GLDR2010-A

COMP2007-2

ECAR2010-1

LS=40% LS=50% LS=70%

LS: Loss Severity Source: Citi Investment Research and Analysis

LS: Loss Severity Source: Citi Investment Research and Analysis

Loan composition appears to cause wide

CPR differences. For example, pools with

large balloon concentrations pay more

slowly.



Loss Coverage Multiples Demonstrate Resilience

We estimate loss coverage multiples by dividing breakeven CDRs for each issuer's individual transaction by the issuer's average CDR across all its transactions (refer to the methodology and assumptions section in the Appendix for more detail). We construct CDR curves by seasoning for each issuer and take a simple average across the curve to calculate issuer's average CDR. Our calculations reveal:

Well Protected Seniors. All the bonds we analyzed are well protected with loss coverage multiples ranging from 7.2-126.5 for the senior most tranches in our severe loss scenario.

Resilient Subs. Subordinate tranches demonstrate good resilience with loss coverage multiples ranging from 5.3-29.8 times in our severe loss scenario. The elevated coverage ratios demonstrate the strong structural support.

German Perseverance. Securitizations collateralized by German auto loans — GMAC, Santander and FCE Bank — demonstrate elevated loss coverage multiples, ranging from 30.7-126.5 times at 70% severity. Peugeot’s COMP 2007-1, containing French collateral, also displays elevated loss coverage levels of 88.7 times (Figure 8).

Figure 8. Auto ABS Loss Coverage Multiples, Selected Transactions

Senior Subordinate Country Originator Deal LS=40% LS=50% LS=70% LS=40% LS=50% LS=70% Germany Volkswagen DRVON 7 13.4 10.6 7.5 9.3 7.4 5.3 Spain Volkswagen DRVES 2011-1 13.8 10.6 7.2 7.6 6.0 4.2 Italy Banque PSA COMP 2007-2 15.4 12.1 8.6 5.4 4.4 3.2 Germany FCE Bank GLDR 2010-A 55.4 43.6 30.7 21.8 17.6 12.8 Germany Santander SCGA 2010-1 61.3 48.2 33.7 31.3 25.1 18.0 France Credipar COMP 2007-1 150.6 122.7 88.7 51.0 41.5 30.0 Germany GMAC ECAR 2010-1 226.9 179.2 126.5 50.8 40.9 29.8

LS: Loss Severity

Source: Citi Investment Research and Analysis



Auto Loan Structural Overview

Strong, Simple Structures. European Auto ABS structural features are simple compared to other asset classes. Most deals offer a simple sequential cash waterfall. There are a few transactions that offer a pro-rata payment structure, subject to targeted OC levels, but the majority of auto transactions prioritize senior notes.

Elevated Senior Credit Enhancement. Average credit enhancement for senior notes of issuers we examined ranges from 8.6-16.0% at cutoff (Figure 9). Due to amortization of senior notes, current credit enhancement levels are much higher than at cutoff.

Subordinate Support. The subordinate notes benefit from a reserve fund (1.5-3.0%) and in some cases overcollateralization. Current subordinate credit enhancement levels for our selected bonds range from 3.7-13.4%.

Figure 9. Average Credit Enhancement Levels Across Auto ABS Programs, 2005-2011 (%)

8.6%

11.4% 11.8%

13.7%14.5%

16.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

DRVON/Volkswagen GLDR/Ford COMP/Peugeot ECAR/GMAC DRVES/Volkswagen SCGA/Santander

Source: Investor Reports, Moody’s and Citi Investment Research and Analysis

Summary — Strength and Stability Offer Good Value

Our analysis reveals that European automotive ABS transactions offer strong credit support and the sector’s loss levels are low. The average WAL is short and the collateral is high quality. These fundamental qualities add up to shaping a good strategy for navigating a difficult market environment. Both senior and subordinate classes demonstrate strong breakeven rates, subject to our most severe assumptions. Senior class loss coverage multiples range from 7.2-126.5 times and subordinate class multiples range from 5.3-29.8 times, subject to our assumptions.



In stressing auto loan ABS, we focus on breakeven constant default rates under highly stressful loss severity scenarios. We compare the breakeven CDRs to average CDRs and express credit enhancement as a multiple of current loss coverage. We create three scenarios that incorporate these factors; 1) a low loss severity scenario, 2) a moderate loss severity scenario, and 3) a severe loss scenario.

Our analysis examines seven on-the-run market transactions. These transactions represent five different originators, from four different regions. These transactions represent a broad typical spectrum of European auto ABS collateral. We calculate our stress scenarios incorporating the following factors:

On-the-run Issuers. We selected actively traded auto ABS names across a wide spectrum of collateral. These include transactions from COMP, DRVES, DRVON, ECAR, GLDR and SCGA.

Loss Severity. We focus on this variable as highly influential to breakeven CDRs. Second-hand pricing of vehicles can vary dramatically, impacting impairment levels.

Cash Flow Calculator. We stress each of the deals using the cashflows provided by Intex and employing varying stress scenarios.

Interest rate. We utilize the three month forward Euribor curve.

Stress Scenarios

We stress auto loan ABS using scenarios appropriate to the structural features of the transactions. In each loss severity scenario, we solve for breakeven CDR. We vary the loan loss severity from 40—70%, and employ the issuer’s average CPRs. This allows us to eliminate seasonality, which is typical of consumer credit behavior. In total, we employ three scenarios to stress the transactions, as follows:

Recovery Delay. We assume a three month recovery delay.

Loss Severity. We assume three different loss severity scenarios:

– Scenario 1 — Low Severity. We use a loan loss severity of 40%.

– Scenario 2 — Moderate Severity. We use a loan loss severity of 50%.

– Scenario 3 — Severe Loss. We use a loan loss severity of 70%.

CPR. For our calculations, we use an issuer average CPR calculated in two steps as follows:

– Step 1. We first calculate a weighted average CPR curve for each issuer, using the following formula:

where, CPRj = weighted average CPR for the shelf after j months of seasoning N = number of deals in the shelf Balancei,j = outstanding balance of deal i after j months of seasoning, and CPRi,j = deal i’s CPR after j months of seasoning

Appendix – Stress Methodology and Assumptions



This provides us with a complete seasoning curve for each of our respective issuers.

– Step 2. Now that we have a weighted average CPR curve for an issuer, we then calculate a simple average using the following formula:

where,

CPRj = weighted average CPR for the shelf after j months of seasoning as calculated in Step 1

M = total number of months in the seasoning curve

This provides with a single average CPR per issuer to use in our calculations.

Loss Coverage Multiple. We estimate a loss coverage multiple by dividing the breakeven CDR for each transaction by the issuer's average CDR across all its outstanding transactions. In order to calculate the issuer’s average CDR, we use a similar method to our calculation of CPRs above. We calculate the average in two steps as follows:

– Step 1. We first calculate a weighted average CDR curve for each issuer, using the following formula:

where, CDRj = weighted average CDR for the shelf after j months of seasoning N = number of deals in the shelf Balancei,j = outstanding balance of deal i after j months of seasoning CDRi,j = deal i’s CDR after j months of seasoning – Step 2. Now that we have a weighted average CDR curve for an issuer, we

then calculate a simple average using the following formula:

where, CDRj = weighted average CPR for the shelf after j months of seasoning as calculated in Step 1 M = total number of months in the seasoning curve



DRVES Exception.

We make one exception in our CDR calculations for DRVES, the recently issued Spanish Volkswagen transaction. As this is the only outstanding deal for VW’s Spanish shelf, it has very little seasoning. We estimate the performance for this transaction as follows:

Competitive analysis. We average available Spanish auto ABS CDR data (we examined Santander, BBVA and a few other issuers).

VW German program. VW’s German receivables pay much more slowly than Spanish banks’ German deals and therefore, we include VW’s German CDR history. This should avoid overestimating the CDR for its Spanish shelf, as it appears that it is likely to pay more slowly than Spanish bank originated collateral.

DRVES CDR Estimates. We calculate the CPR and CDRs for this transaction as follows:

• Spain. We take the Spanish transactions from all issuers and calculate average CPR and CDR seasoning curves as we performed in Step 1. We then calculate a final CPR and CDR as per the Step 2 calculations.

• Volkswagen. Similarly, we calculate CDR and CPR curves for the issuer’s German program, employing the formulae in Step 1 and Step 2.

Combined Estimates. In order to establish Volkswagen Spain CDR and CPR estimates, we then average the Step 2 results for the Spanish banks and Volkswagen Germany.



The market will be watching for the following releases:

UK House Prices. Hometrack Housing Survey reported on 2 October that UK house prices fell 0.1% in September and Halifax reported on 6 October that house prices fell 0.5% during the same period. RICS Housing Market Survey will be released on 10 October and DCLG house prices on 11 October, providing more insight into the state of UK housing market.

NIESR UK GDP Estimate. On 5 October, the Office of National Statistics revised down the second quarter UK GDP growth to 0.1% from 0.2%, quarter-on-quarter. Moreover, on 29 September, Citi economists again cut their UK growth forecasts to 1% in 2011 and 0.7% in 2012. The NIESR GDP estimate for September will provide further clarity on the pace of the economic growth in the UK.

UK Unemployment. On 12 October, the International Labour Organisation will release its three-month rolling UK unemployment rate (ending in August). Citi economists expect the UK unemployment rate to be 8% in 2011 Q3.

Euro-area Inflation. France, Germany, Italy, Portugal and Spain will all release September CPI inflation data. Citi economists expect Euro-area to register 2.6% inflation in 2011 Q3.

Spanish House Transactions. On 10 October, the National Statistics Institute of Spain (INE) will release housing transactions data for August. The number of house transactions decreased 34.8% year-over-year in July 2011.

Critical Events Calendar

Figure 10. Critical Events Calendar, Week of 10 Oct

Date Region Description Period Prior Estimatea

10-Oct France Bank of France Business Sentiment SEP 98 - - Spain House Transactions (YoY) AUG -34.8% - - UK RICS House Price Balance SEP -23% - - 10-13 Oct Ireland New Vehicle Licences SEP 5,275 - - 11-Oct Spain Consumer Price Index (MoM) SEP 0.10% - - UK DCLG UK House Prices (YoY) AUG -1.50% - - NIESR GDP Estimate SEP 0.20% - - US Minutes of FOMC Meeting 12-Oct France Consumer Price Index (MoM) SEP 0.50% - - UK ILO Unemployment Rate (3mths) AUG 7.90% 8.00% US MBA Mortgage Applications -4.30% - - 13-Oct Germany Consumer Price Index (MoM) SEP F 0.10% 0.10% Greece Unemployment Rate (Monthly) JUL 16.00% - - Portugal Consumer Price Index (MoM) SEP -0.40% - - Spain Spain Business Confidence 3Q -9.2 - - US Initial Jobless Claims - - - - 14-Oct Italy CPI - EU Harmonized (MoM) SEP F 1.90% 1.90% US University of Michigan Confidence OCT P 59.4 60

a Bloomberg Survey Estimate

Source: Bloomberg and Citi Investment Research and Analysis

The Week Ahead



New Issuance Spikes Up After Quiet September

Nine primary deals came to market this week amidst optimism in the credit markets that European leaders are acting to contain the sovereign debt crisis (Figure 13). This includes an Australian deal which will have a sterling-denominated tranche. As of 30 September 2011 year-to-date issuance totals €216 billion, the majority of issuance is from the UK (33%) and Netherlands (29%) (Figure 11 and Figure 12).

Delta Lloyd Privately Places A Senior Tranche of Arena 2011-2. The originator’s second deal this year, sized €791 million from the Arena program, pricing the A1 notes (with 2y WAL) at 125bp to the 3-mo Euribor. The A2 tranche (with 4.9y WAL) was partly placed and priced at 165bp to the 3-mo Euribor. Both tranches priced 20bp wider to the comparable notes of Arena 2011-1 which was issued in January.

Nationwide to Issue Notes from Silverstone Program. The originator is planning a new series of notes from its Silverstone Master Trust program. The final deal size is yet to be decided. The deal will have sterling and dollar-denominated notes. The UK trust is one of the best performers with 90d+ delinquencies at 0.28%.

Clydesdale Bank Retains Notes from its Lannraig Program. The originator retained £829 million worth of notes from this buy-to-let transaction. The pool CLTV is 67.2% and the average loan size is £137,900. 84.7% of the pool is interest-only loans. The deal comes after the originator purchased £769 million of BTL notes from its other trust Lanark.

KBC Belgian RMBS Deal. The originator is offering a portion of the €4 billion transaction of its new prime RMBS deal Loan Invest Compartment Home Loan Invest 2011. The pool backing the deal has an LTV of 78.9% with an average loan size of €110,000.

HSBC Brings Turquoise Trust Back to Life. The originator is planning to issue new notes from its UK credit card master trust program Turquoise. Tranche A which is being marketed will only have dollar-denominated notes. The last time notes were issued from this trust was in 2007.

Macquarie Bank Offering Sterling-denominated Auto ABS Notes. The originator will tap the UK markets to fund its Australian Auto ABS program via SMART 2011-3. The GBP-denominated notes are expected to have a WAL of 2.26 years but the final size has yet to be determined.

Securitization New Issue Markets

Figure 11. European ABS Issuance by Sector, 2006-2011 (€ billions)

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010 2011

ABS CMBS RMBS Structured Credit WBS

Figure 12. European ABS Issuance by Region, YTD 2011

Spain20%

Portugal4%

France1%

United Kingdom

33%

Netherlands29%

Italy9%

Germany4%

Source (Figure 1 and Figure 2): IFR and Citi Investment Research and Analysis



Figure 13. New Issuance and Pipeline, Week of 3 Oct

Deal Name Class Amount (in Millions) Fitch/Moody/S&P CE WAL Index Margin (bp) Step-Up Date Status Closing Date PIPELINE Calypso Capital 2011-1 Insurance Linked, Cross-border

A € 100 -/-/BB- 3.00 3mE Offered

A-1 AUD 56 F1+/P-1/- 12 0.37 1mBBSW Offered A-2A AUD[TBD] AAA/Aaa 12.0% 2.26 1mBBSW Offered A-2G GBP[TBD] AAA/Aaa/- 12.0% 2.26 1mL Offered B AUD 8 AA/Aa3/- 9.8% 2.81 1mBBSW Retained C AUD 10 A/A3/- 7.0% 2.81 1mBBSW Retained D AUD 9 BBB/Baa3/- 4.5% 2.81 1mBBSW Retained

SMART 2011-3 Trust Auto ABS, Australia

E AUD 9 BB/Ba2/- 2.0% 2.81 1mBBSW Retained A $500 AAA/Aaa/- 12.0% 2.90 1m$L Offered B £20 A/A1/- 6.5% 2.90 1mL Retained

Turquoise Credit Card Backed Securities 2011-1 Credit Card ABS, UK C £24 NR/NR/- 0.0% 2.90 1mL Retained

A € 3,500 AAA/Aaa/- 14.4% 1mE Jan-15 Offered Loan Invest Compartment Home Loan Invest 2011 RMBS Prime, Belgium

Sub € 532 NR/NR/- 1.2% 1mE Retained

1A [TBD] AAA/Aaa/- 17.2% 2.90 Oct-14 Offered 2A [TBD] AAA/Aaa/- 17.2% 4.85 Oct-16 Offered 3A1 £1,000 AAA/Aaa/- 17.2% Offered 3A2 £3,600 AAA/Aaa/- 17.2% Offered 3A3 £4,400 AAA/Aaa/- 17.2% Offered 1Z [TBD] NR/NR/- 0.0% Retained 2Z [TBD] NR/NR/- 0.0% Retained 3Z1 £76.2 NR/NR/- 0.0% Retained 3Z2 £274.2 NR/NR/- 0.0% Retained

Silverstone Master Issuer 2011-1 RMBS Prime, UK

3Z3 £335.2 NR/NR/- 0.0% Retained PRICED

A1 € 155 3mE 125 Dec-15 Pre-placed 6-Oct A2 € 558 3mE 165 Sep-16 Partly Offered B € 20 3mE Retained C € 18 3mE Retained D € 16 3mE Retained E € 9 3mE Retained

Arena 2011-2 BV RMBS, Netherlands

F € 16 3mE Retained THFC Funding 3 Housing Finance, UK

£100 UKT 2042 180 Placed 5-Oct

A £670 AAA/Aaa/- 20.8% 5.04 3mL 220 Retained 30-Sep Lannraig Master Issuer 2011-1 RMBS BTL, UK B £159 NR/NR/- 0.0% 6.14 3mL 125 Retained

A € 1,290 -/-/AAA 18.5% 5.33 6mE 50 Retained 30-Sep B € 210 -/-/BBB 4.5% 16.52 6mE 70 Retained

AyT Novacaixagalicia Hipotecario I RMBS Prime, Spain

TBD: To Be Determined. NR: Not Rated. N.A.: Not Applicable

Source: IFR, Concept ABS, Informa, Bloomberg and Citi Investment Research and Analysis



Italy Italy

Figure 14. Leasing Delinquencies (%, Jul 04 – Jul 11) Figure 15. Leasing Defaults (%, Jul 04 – Jul 11)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11

Source: Moody’s Source: Moody’s

Total delinquencies increased 26bp in July to 4.61% from June.

Deals originated from 2007 to 2008 registered the maximum delinquencies amongst vintages, averaging 5.05% in July.

Net defaults in July recorded 2.67% as compared to 2.54% in July 2010.

Amongst vintages, deals originated in 2006 reported the highest defaults – 3.40% in July.

EMEA UK

Figure 16. Consumer Loan Defaults (%, Jul 04 – Jul 11) Figure 17. Mortgage Approvals (Aug 07 – Aug 11)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11

0

20,000

40,000

60,000

80,000

100,000

120,000

Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Source: Moody’s Source: Bank of England

Consumer loan defaults in July registered 3.78% as compared to 3.28% in July 2010.

Italy and Spain register default rate of 2.58% and 3.87% respectively.

Mortgage approvals increased in August to 52,410 from 49,644 in June.

The total value of mortgages approved in August was £7.3 billion as compared to £7.0 billion in June

Collateral Summary



Figure 18. Upcoming Investor Reporting Dates, 10 Oct – 14 Oct

Asset Category Country Issuer Ticker Date Automobile ABS

Germany SC Germany Auto SCGA 2010-1 12-Oct SCGA 2006-1 10-Oct SCGA 2008-1 13-Oct SCGA 2008-2 12-Oct SCGA 2009-1 11-Oct SCGA 2011-1 13-Oct Italy Cars Alliance Funding PLC CAR 2007-1 10-Oct Other ABS

Germany SC Germany Consumer SCGC 2008-1 12-Oct SCGC 2009-1 11-Oct SCGC 2010-1 13-Oct SCGC 2011-1 13-Oct S-Core GmbH DBCOR 2008-1 10-Oct Italy Italease Finance SpA ITFIN 2004-1 14-Oct Italfinance Securitisation Vehicle SRL ITALF 2007-1 14-Oct ITALF 2008-1 14-Oct Justine Capital Srl JUST 2006-1 14-Oct Netherlands Amstel Securitisation of Highgrade Exposure

BV SHER 2007-1 10-Oct

Portugal TAGUS - Sociedade de Titularizacao de Creditos SA

TAGST 2009-ENG2 12-Oct

TAGST 2009-ENGY 12-Oct Spain Foncaixa FTGENCAT FTA FONFT -5 10-Oct Rayo Finance Ltd RAYO 2009-3 11-Oct RAYO 2009-4 10-Oct Unicaja AyT Empresas 1 Fondo de Titulizacion

de Activos UNICE 2008-1 10-Oct

UK Andromeda Leasing I PLC ADROL 2009-1 10-Oct Synergatis PLC SYNER 2009-1 10-Oct Student Loan ABS

Higher Education Securitised Investments/The THESI -1A 10-Oct Honours HNRS -2 10-Oct CMBS

Centre Parcs Mortgage Finance PLC CENTP 2007-1 10-Oct Eclipse Ltd ECLIP 2005-3 10-Oct Vanwall Finance PLC VWALL -1 12-Oct RMBS

Ireland Celtic Residential Irish Mortgage Securitisation

CRSM -10 10-Oct

CRSM -9 13-Oct Fastnet Securities PLC FSTNT -2 10-Oct FSTNT -3 10-Oct FSTNT -6 10-Oct FSTNT -7 10-Oct Phoenix Funding PLC FENIX -2 10-Oct Pirus Securities Ltd PIRUS 2008-1 10-Oct Italy Sestante Finance Srl SESTA -2 10-Oct Netherlands CityMortgage MBS Finance BV CMMBS 2006-1A 10-Oct Essence BV ESENC -3 10-Oct Stichting Holland Homes Oranje SHHO 2007-2 10-Oct Spain AyT ICO-FTVPO Cajasol FTA ICOCJ 2009-1 14-Oct


Upcoming Investor Reporting Dates



Figure 18. Upcoming Investor Reporting Dates, 10 Oct – 14 Oct (continued)

Asset Category Country Issuer Ticker Date RMBS UK Balliol Financing BALLI 2008-1 14-Oct Bowbell No 1 PLC BOWBL 2010-1 10-Oct Brunel Residential Mortgage Securitisation PLC BRNL 2007-1A 13-Oct Byzantium Finance PLC BYZAN -1 10-Oct Colston PLC COLST 2007-1 13-Oct Coopers Hill Funding PLC CHILL 2009-1 11-Oct Equity Release Funding PLC ERF -5 14-Oct Greenock Funding PLC GNOCK 2009-5 13-Oct Themeleion Mortgage Finance PLC THEME -2 12-Oct Uropa Securities PLC UROPA 2007-1 11-Oct




Figure 19. UK RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11 Figure 20. UK BBB RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11

0

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600

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11

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AAA UK PrimeAAA UK BTLAAA UK NCRMBSiBoxx Banks SenioriBoxx Non-Sov AAA

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Itraxx Xover 5yr

Source: Markit and Citi Investment Research and Analysis Source: Markit and Citi Investment Research and Analysis

Figure 21. Dutch AAA RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11

Figure 22. Spanish AAA RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11

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AAA Spanish RMBS Spain 5yr Sov CDSiBoxx Banks Senior iBoxx EUR Spain Covered Bond


Figure 23. Italian AAA RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11

Figure 24. Portuguese AAA RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11

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AAA Italian RMBSiBoxx Banks SeniorItaly 5yr Sov CDSiBoxx EUR Italy Covered BondiBoxx Non-Sov AAA

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Portugal 5yr Sov CDS

iBoxx Banks Senior

iBoxx EUR Portugal Covered Bond


Relative Value Charts



Figure 25. Greek AAA RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11

Figure 26. Irish AAA RMBS Generic Spreads Versus Indexes, Jan 10-Sep 11

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Ireland 5yr Sov CDSiBoxx Banks Senior

iBoxx EUR Ireland Covered Bond


Figure 27. UK AAA RMBS Generic Spreads Versus Indexes, Sep 06-Sep11

Figure 28. UK Non-Conforming AAA Generic Spreads Versus Indexes, Jan 10-Sep 11

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Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11

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Itraxx Xover 5yr

UK 5yr Sov CDS


Figure 29. UK AAA BTL Generic Spreads Versus Indexes, Jan 10-Sep 11 Figure 30. CMBS AAA Generic Spreads Versus Indexes, Jan 10-Sep 11

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AAA Sm Pool CMBS GBP

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Rating Actions and Trends

Figure 31. European RMBS Rating Actions, Oct 10-Oct 11 Figure 32. European CMBS Rating Actions, Oct 10-Oct 11

-700

-600

-500

-400

-300

-200

-100

0

100

Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11

# of

Act

ions

Dow ngrade

Upgrade

-160

-140

-120

-100

-80

-60

-40

-20

0

20

40


# of

Act

ions

Dow ngrade

Upgrade

Source: Moody’s, S&P and Fitch Source: Moody’s, S&P and Fitch

Figure 33. European ABS Rating Actions, Oct 10-Oct 11 Figure 34. European Total Securitized Products Rating Actions, Oct 10-Oct 11

-60

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-900

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ions

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Source: Moody’s, S&P and Fitch Source: Moody’s, S&P and Fitch



Figure 35. Rating Actions, 29 Sep – 05 Oct

Sector Issuer Class Rating Agency Action Type Rating from Rating to Change Date ABS

ESMEE 2009-1 A Moody Affirmed Aaa Aaa - 05-Oct B Moody Affirmed A2 A2 - 05-Oct C Moody Affirmed Baa2 Baa2 - 05-Oct D Moody Affirmed Ba2 Ba2 - 05-Oct CMBS DECO 8-C2X A1 Moody Affirmed Aaa Aaa - 03-Oct A2 Moody Downgrade Aa3 A2 (2) 03-Oct B Moody Downgrade Baa2 Ba1 (2) 03-Oct C Moody Downgrade Ba1 Ba3 (2) 03-Oct D Moody Downgrade B2 B3 (1) 03-Oct E Moody Downgrade Caa2 Caa3 (1) 03-Oct ECLIP 2006-2 A Fitch Affirmed AAA AAA - 05-Oct B Fitch Affirmed AAA AAA - 05-Oct C Fitch Affirmed AA AA - 05-Oct D Fitch Affirmed BBB/Wneg BBB/Wneg - 05-Oct E Fitch Affirmed B-/Wneg B-/Wneg - 05-Oct F Fitch Affirmed CCC CCC - 05-Oct G Fitch Affirmed CCC CCC - 05-Oct EURO 23X A Fitch Affirmed AA+ AA+ - 04-Oct B Fitch Affirmed AA AA - 04-Oct C Fitch Affirmed A A - 04-Oct D Fitch Affirmed BBB BBB - 04-Oct E Fitch Affirmed B B/Wneg - 04-Oct F Fitch Affirmed CCC CCC - 04-Oct EURO 27X A Fitch Downgrade AA A (3) 29-Sep B Fitch Downgrade BBB BB (3) 29-Sep E Fitch Downgrade CCC CC (2) 29-Sep FOX 1 A Fitch Downgrade AA/Wneg BBB (6) 29-Sep B Fitch Downgrade A/Wneg BB (6) 29-Sep GGLF 2006-2 A1 Moody Downgrade Aaa/Wneg Baa1 (7) 29-Sep B1 Moody Downgrade Aa3/Wneg B2 (11) 29-Sep WINDM X-X A Fitch Affirmed A/Wneg A - 05-Oct B Fitch Affirmed A-/Wneg A- - 05-Oct C Fitch Affirmed BBB/Wneg BBB - 05-Oct D Fitch Downgrade B CCC (3) 05-Oct E Fitch Downgrade CC C (1) 05-Oct F Fitch Downgrade CC C (1) 05-Oct

BERCR 6 A2 Moody Affirmed Aaa/Wneg Aaa - 04-Oct B Moody Downgrade A1/Wneg A3 (2) 04-Oct C Moody Affirmed Baa3/Wneg Baa3 - 04-Oct D Moody Affirmed B3/Wneg B3 - 04-Oct BKOAM 2009-1 A S&P Upgrade A+ AAA 4 30-Sep FIREN 1 A2 S&P Affirmed AAA AAA - 03-Oct B S&P Downgrade AA- A+ (1) 03-Oct C S&P Affirmed A A - 03-Oct FSTNT 5 A1 Moody Downgrade A1/Wneg Baa1 (3) 30-Sep A2 Moody Downgrade A1/Wneg Baa1 (3) 30-Sep INTRA 1 A S&P Affirmed AAA/Wneg AAA - 04-Oct B S&P Affirmed AA+/Wneg AA+ - 04-Oct MERCU 2003-1 B S&P Upgrade BBB/Wpos A- 2 03-Oct M1 S&P Upgrade AA+/Wpos AAA 1 03-Oct M2 S&P Upgrade A+/Wpos AA+ 3 03-Oct PHEHY 2010-1 A Fitch Affirmed AAA AAA - 05-Oct B Fitch Affirmed BBB BBB - 05-Oct RMAC 2003-NS1X A3 Fitch Affirmed AA+ AA+/Wneg - 29-Sep RMAC 2003-NS2X A3 Fitch Affirmed AA+ AA+/Wneg - 29-Sep RMAC 2003-NS3X A3 Fitch Affirmed AA+ AA+/Wneg - 29-Sep RMAC 2003-NS4X A3 Fitch Affirmed AA+ AA+/Wneg - 29-Sep

Source: Fitch, Moody’s, S&P and Citi Investment Research and Analysis



Figure 35. Rating Actions, 29 Sep – 05 Oct (continued)

Sector Issuer Class Rating Agency Action Type Rating from Rating to Change Date RMBS RMS 20X A2A S&P Affirmed AA AA - 04-Oct A2C S&P Affirmed AA AA - 04-Oct B1A S&P Affirmed BBB BBB - 04-Oct B1C S&P Affirmed BBB BBB - 04-Oct M1A S&P Affirmed AA AA - 04-Oct M1C S&P Affirmed AA AA - 04-Oct M2A S&P Upgrade A A+ 1 04-Oct M2C S&P Upgrade A A+ 1 04-Oct

Source: Fitch, Moody’s, S&P and Citi Investment Research and Analysis



Notes



Notes



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