RPT-Fitch Assigns Asset-Backed European Securitisation Transaction Nine S.r.l. Expected Ratings

Fri May 16, 2014 5:42am EDT

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May 16 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Asset-Backed European Securitisation Transaction Nine S.r.l.'s (A-Best 9) notes expected ratings, as follows:

EUR437.5m floating rate Class A, due December 2028: 'AA+(EXP)sf'; Outlook Stable

EUR22.5m floating rate Class B, due December 2028: 'A(EXP)sf'; Outlook Stable

EUR10.0m fixed rate Class C, due December 2028: 'BBB(EXP)sf'; Outlook Stable

EUR5.0m fixed rate Class D, due December 2028: 'BBB-(EXP)sf'; Outlook Stable

The expected ratings address timely payment of interest and payment of principal by the final maturity date in accordance with the transaction documents. Final ratings are contingent upon the receipt of final documents and legal opinions conforming to the information already received.

The transaction is a static securitisation of performing fixed-rate auto loans advanced to Italian individuals by FGA Capital S.p.A. (FGAC, BBB-/Stable/F3), a joint venture between Fiat S.p.A. (BB-/Negative/B), and Credit Agricole S.A. (A/Stable/F1), through their respective subsidiaries Fiat Group Automobiles S.p.A. and Credit Agricole Consumer Finance.

The senior class A notes will benefit from 13.9% credit enhancement (CE) provided by the subordination of the class B, class C and class D notes (together, the mezzanine notes), the unrated class M notes and a 1.4% non-amortising cash reserve, to be fully funded at closing through a subordinated loan granted by the originator. The transaction also benefits from initial excess spread of approximately 3.25% per annum.

The cash reserve will provide liquidity to cover any shortfall of interest on the rated notes as well as senior expenses. On any payment date, if the cash reserve plus the available funds are sufficient to fully redeem the rated notes the cash reserve will be released to do so, thus providing CE.

KEY RATING DRIVERS

Strong Portfolio Characteristics

Fitch expects lifetime default rates for new- and used-car loans of 1.75% and 3.25%, respectively. The agency applied a common stress multiple of 6.5x at 'AA+sf' on defaults to take into account the late-default definition of 240 days past due (dpd), the low absolute level of the base case for new-car loans, and the significant deterioration of the performance of used-car loans throughout the crisis.

The loans were granted to private individuals only, and 91.5% of the provisional pool as of 8 May 2014, by net present value, was granted for the purchase of a new car. All loans are fully amortising, hence there is no residual value risk.

Counterparty Risk Related To Linked Contracts

The securitised loans also finance the insurance premia of certain policies sold together with the vehicle. Should the insurance policies be considered linked contracts, the SPV could be exposed to certain claims by borrowers if both the insurance company and FGAC default

Sector Outlook and Sovereign Cap

Fitch has a stable to declining outlook for Italian consumer ABS transactions. The rating of the Class A notes is at the cap on Italian structured finance transactions, which is six notches above the rating of the Republic of Italy (BBB+/Stable/F2).

RATING SENSITIVITIES

Unexpected Deterioration in Portfolio Performance

Unexpected increases in the default rate and loss severity on defaulted loans could produce loss levels higher than the Fitch's assumption and could result in potential rating actions on the notes.

Rating Sensitivity to Increased Default Rate Assumptions

Class A notes

Current expected rating: 'AA+sf'

Increase in default rate by 10%: 'AA+sf'

Increase in default rate by 25%: 'AAsf'

Increase in default rate by 50%: 'A+sf'

Class B notes

Current expected rating: 'Asf'

Increase in default rate by 10%: 'A-sf'

Increase in default rate by 25%: 'BBB+sf'

Increase in default rate by 50%: 'BBBsf'

Class C notes

Current expected rating: 'BBBsf'

Increase in default rate by 10%: 'BBB-sf'

Increase in default rate by 25%: 'BB+sf'

Increase in default rate by 50%: 'BB-sf'

Class D notes

Current expected rating: 'BBB-sf'

Increase in default rate by 10%: 'BB+sf'

Increase in default rate by 25%: 'BBsf'

Increase in default rate by 50%: 'B+sf'

Rating Sensitivity to Reduced Recovery Rate Assumptions

Class A notes

Current expected rating: 'AA+sf'

Decrease in recovery rate by 10%: 'AA+sf'

Decrease in recovery rate by 25%: 'AA+sf'

Decrease in recovery rate by 50%: 'AA+sf'

Class B notes

Current expected rating: 'Asf'

Decrease in recovery rate by 10%: 'Asf'

Decrease in recovery rate by 25%: 'Asf'

Decrease in recovery rate by 50%: 'A-sf'

Class C notes

Current expected rating: 'BBBsf'

Decrease in recovery rate by 10%: 'BBBsf'

Decrease in recovery rate by 25%: 'BBB-sf'

Decrease in recovery rate by 50%: 'BBB-sf'

Class D notes

Current expected rating: 'BBB-sf'

Decrease in recovery rate by 10%: 'BBB-sf'

Decrease in recovery rate by 25%: 'BBB-sf'

Decrease in recovery rate by 50%: 'BB+sf'

Rating Sensitivity to Multiple Factors

Class A notes

Current expected rating: 'AA+sf'

Increase in default rate by 10%, decrease in recovery rate by 10%: 'AA+sf'

Increase in default rate by 25%, decrease in recovery rate by 25%: 'AA-sf'

Increase in default rate by 50%, decrease in recovery rate by 50%: 'Asf'

Class B notes

Current expected rating: 'Asf'

Increase in default rate by 10%, decrease in recovery rate by 10%: 'A-sf'

Increase in default rate by 25%, decrease in recovery rate by 25%: 'BBB+sf'

Increase in default rate by 50%, decrease in recovery rate by 50%: 'BBBsf'

Class C notes

Current expected rating: 'BBBsf'

Increase in default rate by 10%, decrease in recovery rate by 10%: 'BBB-sf'

Increase in default rate by 25%, decrease in recovery rate by 25%: 'BB+sf'

Increase in default rate by 50%, decrease in recovery rate by 50%: 'BB-sf'

Class D notes

Current expected rating: 'BBB-sf'

Increase in default rate by 10%, decrease in recovery rate by 10%: 'BB+sf'

Increase in default rate by 25%, decrease in recovery rate by 25%: 'BB-sf'

Increase in default rate by 50%, decrease in recovery rate by 50%: 'B+sf'

Key Rating Drivers and Rating Sensitivities are further described in the presale

report, which will be available at www.fitchratings.com.

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