RPT-Fitch Revises Outlook on Auto ABS 2012-2 S.r.l's Notes to Positive
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Oct 2 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has revised the Outlook on Auto ABS 2012-2 S.r.l.'s (Auto ABS) notes to Positive from Stable and affirmed the notes as follows:
EUR340.7m class A notes (IT0004866775): affirmed at 'AAsf'; Outlook revised to Positive from Stable
Auto ABS is a securitisation of auto loans for an initial collateral amount of EUR621m. The loans were originated by the Italian branch of Banque PSA Finance, a fully owned subsidiary of Peugeot SA (B+/Negative). As of July 2013, 82% of the pool comprised loans granted to private borrowers to buy new cars. The rest of the pool was loans to commercial borrowers (9%) and to private borrowers for the purpose of purchasing used cars (9%).
KEY RATING DRIVERS
Static pool allows for a quick credit enhancement build-up
The revision of the Outlook reflects expected further increase following a build-up in credit enhancement (CE) to considerable levels since the transaction closed in November 2012. As Auto ABS does not envisage a revolving period, class A notes have already amortised to roughly two-thirds of their initial balance, thus building up considerable CE of 20% (vs. 13% at closing). CE will increase further due to the sequential waterfall mandated by the transaction documents.
Better performance than initial expectations
As of August 2013, cumulative defaults (EUR3.37m or 0.54% of the initial pool balance) were lower than Fitch's base case set at closing, mostly due to strong performance of the greatest sub-pool of loans (82% of the total) extended to individuals to buy new cars. However, given uncertainty surrounding the Italian economy and the early stage of life of the transaction, Fitch is maintaining its original lifetime default base case of 3%.
The transaction also benefits from healthy levels of net excess spread that to date has always been higher than 3%.
Payment interruption risk and commingling risk
Commingling risk is well-mitigated by the available CE, and payment interruption risk is more than adequately mitigated by the presence of a EUR10m non-amortising cash reserve. Also the appointment of a new back-up servicer (BUS) - as triggered by the transaction documentation - is seen as a mitigating factor for payment interruption risk arising from the servicer's default. However, the BUS agreement does not envisage explicit time limits for the BUS to step in after a default event of Banque PSA.
The current rating is resilient to rather stressful assumptions on future defaults, recoveries and excess spread. For example, applying a 1.25x loss rate multiplier to the assets in the pool would not result in any downgrade.
Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue report published on 19/11/2012 and available at www.fitchratings.com
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