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TEXT-Fitch expects to rate Volkswagen Auto Lease Trust 2012-A
(The following statement was released by the rating agency)
June 11 - Fitch Ratings expects to assign the following ratings to Volkswagen Auto Lease Trust 2012-A:
--$171,000,000 class A-1 notes 'F1+sf';
--$384,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$370,000,000 class A-3 notes 'AAAsf'; Outlook Stable; and
--$75,000,000 class A-4 notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Strong Collateral Quality: The weighted average (WA) FICO score of 750 is consistent with prime auto lease ABS and indicates a strong lessee. Although the pool is well seasoned, there is a meaningful concentration in leases with original terms over 36 months, leading to some back-ended contract maturities.
CE Structure: 2012-A incorporates a sequential-pay structure. Initial credit enhancement (CE) is 15.75% of the initial securitization value, growing to 17.25% of the initial securitization value. Initial excess spread is expected to be 5.17% based on the contract rates and a 7.25% discount rate.
Low Historical Loss Levels: Credit losses on VCI's portfolio have returned to low levels in the last few years following increases in 2008-2009. Residual value (RV) realizations have returned to gains following significant losses in the 2008-2009 downturn, consistent with other lease originators.
Risks from Increasing Sales Expectations: While RV realizations have improved in recent years, VW has aggressive sales growth targets worldwide, including substantial growth in the U.S. A dramatic increase in future used vehicle supply could impair RV realizations.
New Model Introduction and Assumptions: 2012-A includes nearly 40% in vehicles for which disposition data from the last industry downturn (2008-2009) was unavailable. Fitch's analysis sought to evaluate these vehicles by looking to RV performance data for similar vehicle models.
Stable Origination/Underwriting/Servicing: Fitch believes VCI demonstrates strong capabilities as, underwriter, and servicer to service the 2012-A pool. Fitch rates VW 'A-/F2', Outlook Positive.
Unstable Macroeconomic Conditions: While the wholesale vehicle market in the U.S. is currently strong, Fitch remains concerned regarding potential macroeconomic deterioration, which could lead to increased credit and residual loss levels.
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