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Feb 12 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Red & Black TME Germany 1 UG (haftungsbeschraenkt)’s EUR261.1m class A notes at ‘AAAsf’ with a Stable Outlook.
The transaction is a securitisation of German equipment lease receivables originated by GEFA Gesellschaft fuer Absatzfinanzierung mbH (GEFA, not rated), which is part of Societe Generale (A/Stable/F1). GEFA also acts as the servicer. The transaction is static and started amortising immediately after closing.
The affirmation is driven by the stable asset performance since transaction closing in February 2013. Cumulative defaults as of the investor report from December 2013 were 0.15% of the transaction closing balance, which is well below Fitch’s default expectation. As recoveries have not yet been realised, the cumulative loss rate is about 0.13%. However, Fitch expects recoveries to increase and converge with our recovery base case expectation of 80% over the transaction’s remaining lifetime. Delinquencies are fairly low, with accounts in arrears for more than 30 days representing 0.33% of the outstanding collateral. As securitised lease receivables are granted to commercial obligors in Germany, corporate insolvencies are the main risk factor for the transaction. Fitch expects the German economy to continue to grow. In this environment we expect corporate insolvencies to remain moderate and consequently we do not expect performance deterioration, which is reflected in the Stable Outlook. The transaction benefits from credit enhancement through a fully funded reserve fund, which is currently at its required level of EUR6m. In addition, overcollateralisation is provided to the senior class of notes by a subordinated, unrated junior note tranche. Overall, credit enhancement for the class A notes has increased to 26.7% compared with 15.5% at closing. Excess spread of about 3% supports the transaction and offers a first layer of protection against defaults.
GEFA has been permitted to take deposits from customers since February 2012. At transaction closing, the entity did not offer deposit accounts to commercial customers but started to take these deposits in January 2014. Fitch deems potential set-off risks relating to deposits from commercial customers as moderate and sufficiently offset by the class A credit enhancement. Furthermore, we deem structural features and the available credit enhancement to sufficiently reduce the risk of non-performance of involved counterparties.
Fitch has revised its lifetime default base case assumption to 2.0% from 3.9% at closing. This reflects amortisation in the transaction and our expectation of stable asset performance. The recovery base case assumption has been maintained at 80%.
Rating sensitivity to increased default rate (class A): Current Rating: ‘AAAsf’
Increase base case defaults by 25%: ‘AAAsf’
Rating sensitivity to reduced recovery rate (class A):
Current Rating: ‘AAAsf’
Reduce base case recovery by 25%: ‘AAAsf’
Rating sensitivity to increased default rate and reduced recovery rate (class A):
Current Rating: ‘AAAsf’
Increase default base case by 25%; reduce recovery base case by 25%: ‘AAAsf’