KBRA puts Motor Securities notes on watch downgrade over loss reporting issue

Traders Union
All News
Financial Institutions
Motor Securities notes downgrade

Highlights

KBRA UK placed BBB (sf)/BBB- (sf) ratings on Motor Securities 2023-1 and 2024-1 DAC Tranche D/Class D CLNs on Watch Downgrade due to underreported historical losses from a calculation issue.
Santander Consumer (UK) PLC identified a reporting problem with Guaranteed Future Value balances, prompting review of protection claims, loss amounts, and potential breach of transaction triggers.
Issuers deferred interest and protection fee payments due 25 October 2026 to at least 25 November 2026, and KBRA expects to update Watch status within 90 days after review completion.

Ratings action and reporting review

As reported by KBRA, citing Kroll Bond Rating Agency, KBRA UK has placed on Watch Downgrade the BBB (sf) ratings on Tranche D and the Class D Credit Linked Notes of Motor Securities 2023-1 DAC, along with the BBB- (sf) ratings on Tranche D and the Class D Credit Linked Notes of Motor Securities 2024-1 DAC.

The agency says the action follows the identification of a reporting issue involving the calculation of credit protection claims, which may have understated historical losses. The issuers say the Cash Administrator, Santander Consumer (UK) PLC, identified a problem in the treatment of certain Guaranteed Future Value balances used in those calculations.

KBRA says the issue may have reduced protection payments due from the issuers and could weaken the credit enhancement supporting the notes. Santander Consumer (UK) PLC is reviewing the size of any underclaimed losses and whether corrected figures would have caused earlier breaches of transaction triggers or altered the historical operation of the deals.

On 30 October 2026, the issuers also announced that noteholders agreed to defer interest payments due on 25 October 2026 until at least 25 November 2026, or a later date notified by the Protection Buyer. Corresponding protection fee payments and some reporting obligations are also deferred while the review continues.

Broader transaction impact and market pressure

Motor Securities 2025-1 DAC is also affected by the reporting issue, although KBRA says its exposure to Guaranteed Future Value-related losses is limited and the reported impact so far is low. Motor Securities 2022-1 DAC is not affected because it has no exposure to Guaranteed Future Value-related losses, and neither of those transactions is placed on Watch.

Separately, KBRA says prevailing used vehicle market dynamics are expected to push voluntary termination losses higher. The rating agency says the Watch Downgrade placements reflect uncertainty over final loss amounts, the effect of corrected calculations on credit enhancement, amortisation and cashflows, and the possibility of increased voluntary termination losses.

KBRA says it plans to resolve or update the Watch placements within 90 days, after the Cash Administrator completes its review and updated transaction reporting is available.

Our earlier coverage on sovereign resilience in a higher-rate environment explained how persistent geopolitical shocks and elevated fiscal spending can raise borrowing risks as funding costs stay high. We noted that emerging and frontier markets are particularly exposed because debt-service burdens tend to be heavy relative to narrower revenue bases, while inflationary spillovers from conflicts can further strain credit profiles.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.