(Repeat for additional subscribers)
April 7 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings and Rating Outlooks to the notes issued by BMW Vehicle Lease Trust 2014-1:
--Class A-1 asset-backed notes ‘F1+sf’;
--Class A-2 asset-backed notes ‘AAAsf’; Outlook Stable;
--Class A-3 asset-backed notes ‘AAAsf’; Outlook Stable;
--Class A-4 asset-backed notes ‘AAAsf’; Outlook Stable.
Stable Collateral Quality: The pool is consistent with that of 2013-1, with a strong WA FICO score of 765 and seasoning of 10 months. While the securitized residual has increased to 71.26%, model concentrations have decreased with the top model making up 28.3% of the pool.
Adequate credit enhancement Structure: Initial credit enhancement has decreased by 0.50% from 2013-1 and will be 16.75%, growing to 19% of the initial securitization value. Initial excess spread is expected to be 4.79%, in line with 2013-1. Loss coverage remains adequate to support Fitch’s ‘AAAsf’ stressed assumptions.
Strong Credit and Normalizing Residual Performance: Credit losses on BMW Financial Services’ (FS) portfolio have decreased from elevated levels seen in 2008 and 2009 due to strong obligor credit quality. In addition, the portfolio is displaying a decrease in residual gains from prior years due to the stabilization in the wholesale used vehicle market which has lowered residual realizations. Fitch’s base case credit net loss proxy is 0.90%, and adjusted residual value loss proxy is 14.40%.
Evolving Wholesale Market: The U.S. wholesale vehicle market has remained strong in recent years. However, increasing off-lease vehicle supply and pressure from increased production levels could lead to decreased residual realization during the life of the transaction.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of BMW FS would not impair the timeliness of payments on the securities.
Stable Origination/Underwriting/Servicing: BMW FS demonstrates adequate abilities as originator, underwriter, and servicer, as evidenced by historical portfolio delinquency and loss experience and securitization performance.
Unanticipated decreases in the value of returned vehicles and/or increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn would likely result in declines of credit enhancement and loss coverage levels available to the notes. Hence, Fitch conducts sensitivity analyses by increasing the transaction’s initial base case RV and credit loss assumptions and examining the rating implications on all classes of issued notes. The increases to the base case losses are applied such that they represent moderate (1.5x) and severe (2.5x) stresses, respectively. They are also intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust’s performance.
The presale report is available at ‘www.fitchratings.com’ or by clicking on the below link.
Link to Fitch Ratings’ Report: BMW Vehicle Lease Trust 2014-1 (US ABS)