TEXT-Fitch: GM Ch 11 has little effect on GMAC auto ABS

(The following statement was released by the rating agency)

June 1 - Today's announcement of General Motors Corp. (GM) filing for
Chapter 11 bankruptcy protection is expected to have limited immediate ratings
implications on outstanding auto related ABS transactions issued by GMAC,
according to Fitch Ratings.
'The largest potential impact on transaction performance will likely result
from meaningful declines in retail and wholesale values on GM manufactured
vehicles,' said Senior Director Ravi Gupta. 'These declines may arise from
potential post-bankruptcy developments such as further declines in consumer
demand for new and used GM manufactured vehicles, brand reductions or
eliminations, and disorderly reductions in a large number of franchised dealers
and their existing vehicle inventories, among other factors.'
The U.S Government has made clear, however, its intention of supporting GM
through this bankruptcy. This support includes making funds available to ensure
continued manufacturing operations, a viable supplier base, retail and
wholesale financing capacity and certain dealer support. 'While its unclear if
this support will result in an expedited restructuring and exit from
bankruptcy, it may limit potential significant immediate asset performance
deterioration,' said Gupta.
Additionally, Fitch does not believe there is heightened potential for
servicing disruption for any outstanding ABS transaction. The GM filing is not
expected to have any immediate financial ramifications on GMAC, which is the
primary servicer for all transactions. GMAC, through separate ownership and
significant government support and funding, should be able to maintain
operations and ongoing capacity to effectively continue servicing the assets
and fulfill all its servicing obligations.
Fitch currently rates approximately $14.7 billion in outstanding auto loan ABS,
auto lease ABS and dealer floorplan ABS issued by GMAC and supported by
financings related to GM manufactured vehicles.
Auto loan ABS:
Potential declines in wholesale values of GM manufactured vehicles may impact
performance for GMAC issued auto loan ABS. While Fitch does not expect material
increases in borrower default frequency as a result of the filing, decreases in
wholesale values will result in lower recovery rates of future defaults,
ultimately resulting in higher lifetime net losses for each auto loan pool. It
appears, however, that GM, through support from the U.S. Government, will be
able to honor vehicle warranties and ensure availability of parts and services.
Additionally, GM has meaningfully reduced new vehicle production to better
align existing supply inventory with reduced demand. Both factors may serve to
limit overall negative impact to used vehicle values.
Fitch currently rates outstanding auto loan ABS transactions issued by GMAC
totaling approximately $3.4 billion in outstanding notes. Additionally, Fitch
rates one transaction issued by another sponsor that is supported largely by GM
vehicle-related loans sold by GMAC to the issuer. These transactions are listed
below:
Auto lease ABS:
Wholesale vehicle value declines could also have some near term implications on
lease-end residual value realizations. As both Chrysler and GM seek to reduce
their dealership bases, there is the potential that more vehicles will be
forced into the wholesale supply, impairing wholesale values for the overall
market.
As in the case of auto loan ABS, Fitch does not anticipate material increases
in lessee default frequency for lease securitizations, although similar
severity implications may apply.
Considering the above, Fitch believes the primary risk of a GM bankruptcy
filing to lease securitizations is deterioration in near-term residual value
performance. If there were to be material weakness in residual realizations in
the next 6-to-12 months, 2006 and early 2007 vintage lease transactions would
be more exposed to this stress, given their heavy concentrations in near-term
residual value maturities. However, these transactions have generally built
significant loss protection to date, due to the non-declining nature of their
credit enhancement structures.
Currently, all rated GM lease securitizations as listed below can support base
case residual losses consistent with the worst historical experience. As such,
Fitch does not anticipate significant rating volatility in the event of a GM
bankruptcy. However, if residual value deterioration is worse than expected in
the near-term or protracted, impairing transactions' ability to build credit
enhancement, rating actions may be necessary.
Dealer floorplan ABS:
Fitch expects the GM filing to have a negative effect on new vehicle sales
levels at existing dealers, weakening the financial profile of the franchised
dealer base and potentially increasing dealer bankruptcies. Furthermore, GM's
filing may accelerate the phase out of certain brands already indicted as part
of their overall restructuring plans, potentially putting respective dealers
under additional financial distress.
However, the targeted dealers generate a fairly small portion of GM's overall
new vehicle sales. Additionally, GM has indicated its intention to orderly
phase-out dealers through the year and support existing inventories. Given the
government's recent capital injection and potential funding capacity through
its bank subsidiary, GMAC should also be able to provide adequate financing to
the outstanding inventory of vehicles for GM dealers, at least on short term
basis. Should this occur, the overall negatively impact the dealer floorplan
ABS may be limited.
Fitch downgraded its outstanding GMAC related dealer floorplan ABS on April 14,
2009 and placed all transactions on Rating Watch Negative following continued
system-wide deterioration in the domestic auto industry and the bankruptcy risk
of GM. SWIFT X had previously entered amortization and is accumulating
principal pending its near-term maturity date while SWIFT XI will enter early
amortization due to a trigger event associated with a GM Ch. 11 filing. Should
monthly payments rates and losses not material deteriorate from current levels,
both transactions should repay full principal within the next few months. SWIFT
2007-AE1 and SMART, while structured with significantly more credit enhancement
than the previous SWIFT transactions, do not contain a similar trigger event
and will continue to revolve in accordance with their transaction documents.
Fitch will be monitoring developments surrounding GM's bankruptcy and how they
may affect the following ABS transactions: