TEXT - Fitch rates Red & Black TME Germany 1 UG

Wed Feb 27, 2013 12:04pm EST

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(The following statement was released by the rating agency)
    Link to Fitch Ratings' Report: Red & Black TME Germany 1 UG 
(haftungsbeschraenkt) here

Feb 27 - Fitch Ratings has assigned Red & Black TME Germany 1 UG's
(haftungsbeschraenkt) issue of class A and B notes ratings as 
follows:

EUR513m class A notes, due January 2023: 'AAAsf'; Outlook Stable
EUR87m class B notes, due January 2023, unrated

Key Rating Drivers:

The ratings are based on Fitch's assessment of the originator's underwriting and
servicing procedures, the agency's expectations of future asset performance, the
available credit enhancement, and the transaction's legal structure.

The issuance proceeds were used to purchase a German portfolio of loan 
receivables backed by trucks and other moveable equipment originated by GEFA 
Gesellschaft fur Absatzfinanzierung mbH (GEFA), a wholly owned subsidiary of 
Societe Generale ('A+'/Negative/'F1+'). The loans are granted entirely to 
commercial customers.

The transaction is static and will start amortising after closing.

The portfolio equals EUR600m and consists of 19,497 loan contracts. The loans 
are backed by nine types of collateral, the largest four being: trucks (roughly 
32% of the portfolio notional), construction machines (26%), buses (11%) and 
agriculture machines (10%). Fitch notes that the assets are not standard assets 
seen in typical auto ABS transactions.

The debtors are SMEs. Portfolio concentrations by debtor and industry in this 
transaction are higher than in typical auto ABS securitisations. At the same 
time, recoveries are usually obtained from the sale of the financed object, 
which is a characteristic of an ABS transaction.

Hence, in the agency's view, the transaction contains elements of both an ABS as
well as a SME securitisation. Fitch, therefore, used a combination of these 
rating approaches when analysing the transaction.

When deriving its portfolio default risk assumptions, Fitch applied its Criteria
for Rating Granular Corporate Balance-Sheet Securitisations (SME CLOs), dated 
November 2012. To size the risk of default, the agency used its proprietary 
Portfolio Credit Model (PCM). This resulted in a base case portfolio default 
rate of 3.9% over the transaction's life of 17 months, which is higher than the 
base case default rates typically assumed for other auto ABS transactions rated 
by Fitch.

Fitch applied its EMEA Consumer ABS Rating Criteria, dated July 2012, when 
deriving base case recovery rate assumptions. The agency observed that 
historical recovery rates have been high compared to typical auto ABS 
transactions. Fitch assumed a base case recovery rate of 80% for the overall 
portfolio, in line with the long-term average.

The agency further assumed a recovery stress haircut between median and high, 
e.g. 55% in 'AAAsf'. This haircut reflects the agency's concern that the 
second-hand market for collateral securitised in the portfolio can be less 
liquid and more volatile than, for example, the used car market. Furthermore, 
the portfolio consists of nine different collateral types, which can have 
significantly different recovery prospects.

Rating Sensitivities:

The agency ran various rating sensitivity scenarios to outline the effect on the
assigned ratings if the key rating parameters - default rate and recovery rate -
were stressed. An increase of 25% in the base case default rate and a decrease 
of 25% in the base case recovery rate would result in a rating of 'Asf' for the 
class A notes. Further sensitivities are outlined in the new issue report for 
the transaction. 

GEFA (NR) acts as servicer of the loans. While there is no back-up servicer in 
place from closing onwards, the transaction foresees the appointment of a 
back-up servicer in case of deterioration of Societe Generale's credit quality, 
even before a servicer termination event occurs. In this case GEFA will continue
servicing the loans, while the back-up servicer will be standing by and ready to
take over the servicing in case the original servicer does have to be replaced. 
This procedure is viewed positively by Fitch.

A new issue report, including further information on transaction related stress 
and sensitivity analysis, and material sources of information that were used to 
prepare the credit rating is available at www.fitchratings.com.

 (Caryn Trokie, New York Ratings Unit)
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