(Repeat for additional subscribers)
Feb 14 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Swiss Auto Lease 2012-1's CHF200m class A notes at 'AAAsf' with Stable Outlook. The transaction is a securitisation of auto lease receivables originated in Switzerland to private and commercial customers by Cembra Money Bank AG (Cembra; former GE Money Bank AG).
KEY RATING DRIVERS
The affirmation reflects the transaction's stable performance, which is better than Fitch's expectations. According to the December 2013investor report, the observed cumulative default rate since closing in March 2012 was 0.57% of the initial pool balance including additionally purchased assets. The cumulative loss rate for the same period was 0.18%.
The transaction features a three-year revolving period since closing. Consequently, it will continue replenishing until March 2015 unless early amortisation is triggered following an early termination event. However, Fitch believes that the cumulative default trigger (0.38% -3.75% depending on the period since closing) and the delinquency trigger (>30 days exceeding 2.45% on two consecutive purchase dates) are unlikely to initiate early amortisation of the class A notes since they are significantly above the originator's historical default or delinquency rates.
Credit enhancement consists of overcollateralisation (30%) and the release amount from the reserve fund (0.9%). During the revolving period, the class A notes cannot build up additional credit enhancement. The available credit enhancement of 30.9% is well above Fitch's initial 'AAAsf' credit and residual value loss of 14.1%. Additionally, the transaction benefits from a substantial amount of excess spread that has been sufficient to cover the losses realised so far. To consider potential pool deterioration over the revolving period, Fitch constructed a worst-case portfolio subject to the replenishing criteria. This creates additional comfort since the replenishing limits have not been reached.
The current pool as of December 2013 is similar to the one at closing. Currently, the total pool amount is CHF285.7m, which is spread over 19,667 lessees. Of the balance, 54.1% are new vehicle leases and 45.9% used vehicle leases. The pool remains highly granular with the largest lessee accounting for 0.06% of the total pool balance and the largest 20 lessees 0.88%.
In addition to the amortising lease component, the transaction also securitises residual values (RV). Hence, the performance of the class A notes is dependent on credit risk and RV risk of the underlying lease contracts. The current RV share is 36.6% as of the December 2013 reporting date, which is below the maximum RV of 40% that is allowed according to the replenishing criteria and that Fitch assumed when constructing the worst-case portfolio at closing.
Although the Swiss car market is currently under pressure with realised RVs having decreased by approximately 5% points since 2011, Fitch believes that the initially assumed RV loss of 36.6% in an 'AAAsf' rating scenario is still adequate to reflect the risk of a car market value decline.
Cembra, the originator, is publicly listed on the SIX Swiss Exchange and registered as a Swiss bank with a full banking licence and regulated by FINMA, the financial markets supervisory authority in Switzerland.
The transaction's structure is more complex than usual for a leasing transaction. The class A notes consist of three-year bullet notes (the original notes) which will either be repaid at maturity or replaced by amortising notes (the exchange notes). Fitch has given no credit to the seller's repurchase option at the notes' third anniversary. In its initial analysis, Fitch instead assumed a three-year revolving period followed by amortisation.
Fitch views the key rating drivers for the transaction as (i) the stable underlying asset performance; (ii) the long revolving period of three years; (iii) the RVs securitised in addition to the instalment portion, (iv) the substantial credit enhancement compared with Fitch's assumed total losses.
The transaction is primarily sensitive to the RVs, which mostly depend on used vehicle market prices. If used car prices fall materially in Switzerland, this may lead to potential losses to the transaction in a scenario where the dealers are not around to take the RV risk. However, with credit enhancement well above our loss assumption, rating sensitivity is limited.
Expected impact upon the note rating of increased defaults and reduced recoveries (Class A): Current Rating: 'AAAsf'
Increase base case defaults by 25%; reduce base case recoveries by 25%: 'AAAsf' Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue report dated 23 March 2012 at www.fitchratings.com.