RPT-Fitch Affirms Free Mobility 6 Notes Following Commingling Reserve Amendment

Mon Mar 3, 2014 5:56am EST

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March 3 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Free Mobility No. 6 UG's class A and B asset-backed notes as follows:

EUR244.6m Class A notes affirmed at 'AAAsf'; Stable Outlook

EUR28.6m Class B notes affirmed at 'A-sf'; Outlook Positive

Free Mobility 6 (the issuer) is a securitisation of German auto loan receivables originated by FFS Bank GmbH (NR, FFS Bank), which also acts as servicer. The securitised portfolio consists of secured, fixed-rate loans advanced to borrowers within Germany. At closing in December 2012 the portfolio consisted of 49.9% balloon loans.

KEY RATING DRIVERS

Fitch has been informed of a proposed change to the commingling reserve account provisions. The issuer is currently the holder of this account. It is intended that the commingling reserve will be moved an account held by FFS Bank, which will in turn grant a pledge to the issuer over this account.

Fitch has been provided with draft documentation and legal opinions stating that the issuer is entitled to enforce its pledge in an FFS Bank insolvency scenario.

The agency has recently noted an increasing number of German securitisations where collection accounts in the name of the servicer were pledged in favour of the issuer and, as is the case here, the SPV is the sole party entitled to dispose of the collections in the pledged account. Moreover, the transaction benefits from a liquidity facility sized for approximately three months of interest on the notes and senior fees, which in Fitch's view, is sufficient to cover for a moratorium that could be imposed on FFS Bank in an insolvency scenario.

Based on the legal provisions and the availability of liquidity, Fitch believes that any additional legal or operational risks resulting from the proposed amendment is minimal.

Since Fitch's last review in December 2013, delinquency, default and recovery levels have been stable and remain in line with Fitch's projections. As of end-January 2014, cumulative losses and 30 day plus delinquencies were 0.37% and 3.5% respectively. However, the stable performance should be viewed in the context of the increased balloon component of the loans as they amortise (currently 54.1% of the net nominal pool balance).

As of end-January 2014, the outstanding class A notes accounted for 56% of their initial balance. Credit enhancement, which takes into account the reserve fund and the subordinated loan, had increased to 21.4% from 13.1% at closing. The comparable levels for the class B notes were 12.1% vs. 7.4% at closing. The improved credit enhancement and the overall solid performance of the asset portfolio are reflected in the Positive Outlook on the class B notes.

RATING SENSITIVITIES

Based on the amortisation to date and the solid performance, Fitch maintains its base case loss assumptions stable.

Expected impact upon the note rating of increased losses (higher defaults and reduced recoveries):

Current Ratings: class A: 'AAAsf'/class B: 'A-sf'

Increase base case defaults by 25%; reduce base case recoveries by 25%:

Projected Ratings: class A: 'AAAsf' /class B: 'A-sf'

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