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May 28 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Globaldrive Auto Receivables 2014-A B.V.’s class A and class B notes final ratings as follows:
EUR500m class A notes (XS1059372455): ‘AAAsf’; Stable Outlook
EUR16.3m class B notes (XS1059373008): ‘AAsf’; Stable Outlook
EUR27.2m class C notes: ‘NRsf’
The transaction is a true sale securitisation of German auto loans originated by FCE Bank plc (FCE Bank; BBB-/Positive/F3) through its German branch. It is the second securitisation of German auto loans originated by FCE Bank rated by Fitch. FCE Bank is part of the Ford Motor Company group.
The ratings reflect the pool’s expected asset performance, available credit enhancement for the rated notes, the transaction’s legal structure and FCE Bank’s sound origination and servicing procedures.
Fitch determined a base case default rate of 1.75% and a base case recovery rate of 70% for the overall pool. The split of different product categories (sub-pools) has fluctuated moderately over the past five years. However, Fitch deemed the weighted average base case default and recovery rates, based on combinations of varying assumptions for each sub-pool, as not sufficiently different from the overall portfolio data to justify using separate base cases. The base case assumptions incorporate a stable economic outlook for Germany.
FCE Bank services the securitised loans. A servicer termination event will be triggered by an insolvency of the bank or by the non-performance of FCE Bank on its duties. There is no appointed replacement servicer. A non-amortising liquidity reserve reduces payment interruption risk. Fitch deems the reserve fund to be sufficient to cover at least five months of senior expenses and interest on the class A and B notes in a ‘AAAsf’ scenario, assuming stressed servicing fees of 100 basis points per annum.
Commingling risk arises from cash flows that fall into the servicer’s bankruptcy estate before being transferred to the issuer’s account. FCE Bank funded a commingling reserve at closing equal to 2.2% of the initial loan balance. The reserve will be increased to 2.4% of the initial loan balance in October 2016 to address additional commingling risk from repayment of maturing balloon amounts. Fitch judges this mechanism sufficient to mitigate the identified commingling risk.
The class A and B notes are euro-denominated. Class A interest is floating, while the class B notes’ coupon is fixed.
Credit enhancement for the class A notes is 8.7%, provided through overcollateralisation from subordination of class B and C notes and a liquidity reserve funded at closing with EUR3.9m, equal to 0.75% of the class A and B notes. Excess spread in the transaction provides a first layer of protection against losses.
The transaction is static and started amortising at closing. The securitised receivables portfolio consists of 40,213 loans, with an outstanding aggregate principal balance of EUR543.5m. Of the pool balance, 29.9% consists of amortising loans, and the remainder is balloon loans. The vehicles financed are new cars (71.4%), ex-demonstration cars (14.9%) and used cars (13.7%).
Expected impact upon the note rating of increased defaults (Class A/Class B):
Original Ratings: ‘AAAsf’/‘AAsf’
Increase base case defaults by 10%: ‘AA+sf’/‘A+sf’
Increase base case defaults by 25%: ‘AA+sf’/‘A+sf’
Increase base case defaults by 50%: ‘AAsf’/‘A-sf’
Expected impact upon the note rating of decreased recoveries (Class A/Class B):
Original Rating: ‘AAAsf’/‘AAsf’
Reduce base case recovery by 10%: ‘AAAsf’/‘A+sf’
Reduce base case recovery by 25%: ‘AA+sf’/‘A+sf’
Reduce base case recovery by 50%: ‘AA+sf’/‘Asf’
Expected impact upon the note rating of increased defaults and decreased recoveries (Class A/Class B):
Original Rating: ‘AAAsf’/‘AAsf’
Increase default base case by 10%; reduce recovery base case by 10%:
Increase default base case by 25%; reduce recovery base case by 25%:
Increase default base case by 50%; reduce recovery base case by 50%:
Key Rating Drivers and Rating Sensitivities are further described in the accompanying New Issue report available at www.fitchratings.com.
Link to Fitch Ratings’ Report: Globaldrive Auto Receivables 2014-A B.V.