June 22, 2017 / 12:41 AM / 7 months ago

Fitch Assigns Expected Ratings to FP Ignition 2017 - B Trust

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: FP Ignition 2017 - B Trust here SYDNEY, June 21 (Fitch) Fitch Ratings has assigned expected ratings to FP Ignition 2017 - B Trust's automotive lease-backed floating-rate notes. The issuance consists of notes ultimately backed by New Zealand finance and operating vehicle leases originated by Fleet Holding (NZ) Limited (FleetPartners NZ), a subsidiary of FleetPartners Pty Limited (FleetPartners). The ratings are as follows: NZD130.4 million Class A notes: 'AAA(EXP)sf'; Outlook Stable NZD10.2 million Class B notes: 'AA(EXP)sf'; Outlook Stable NZD17.4 million Class C notes: 'A(EXP)sf'; Outlook Stable NZD12.0 million Class D notes: 'BBB(EXP)sf'; Outlook Stable NZD14.0 million Class E notes: 'BB(EXP)sf'; Outlook Stable NZD4.0 million Class F notes: 'B+(EXP)sf'; Outlook Stable NZD2.0 million Class G notes: 'NR(EXP)sf' NZD10.0 million Originator notes: 'NR(EXP)sf' The notes will be issued by NZGT (FP) Trustee Limited in its capacity as trustee of FP Ignition 2017 - B Trust. The total underlying collateral pool consisted of 8,332 leases totalling NZD235.9 million at the 30 April 2017 cut-off date. FleetPartners NZ has indicated to Fitch that the final lease-receivable pool will be adjusted to match the final liability balance, with no significant changes to the portfolio stratifications expected. KEY RATING DRIVERS Residual Value Risk Present: This is the third term securitisation, and the first in New Zealand, by FleetPartners that includes operating leases within the lease portfolio. The lessees are a broad mix of small-to-medium entities (SMEs) through to large corporations and government entities. Residual value (RV) and vehicle-servicing risk are present within the transaction due to the inclusion of operating leases, along with credit risk. Fitch assumes 'AAAsf' RV losses of 15.1%. Large Lessee Concentration: The pool's 20-largest obligors account for about 26.4% of the asset balance. Fitch deems this concentration higher than usually observed in consumer ABS transactions and has therefore derived default assumptions while considering lessee concentrations and correlation risks, in line with its SME criteria. Sufficient Enhancement: The transaction incorporates a sequential pay/pro rata pay structure, consistent with other ABS transactions. Pro rata paydown will commence when hard credit enhancement (CE) reaches 45.0% for the class A notes, subject to transaction performance. Overall CE is sufficient to cover the Fitch-stressed cumulative net loss assumptions in all Fitch scenarios. The transaction also comprises a vehicle-servicing account to enable the issuer to fund operating lease vehicle-servicing obligations. Mixed Collateral Included: The collateral backing the transaction comprises of lease receivables backed by a mix of passenger vehicles as well as light and heavy commercial vehicles, with a weighted-average seasoning of 18.1 months and an average receivable size of NZD28,306. Operating leases comprise 93.8% of the portfolio and finance leases 6.2%. Historically, FleetPartners' 30+ day delinquencies for their New Zealand and Australian assets have generally tracked below Fitch's Dinkum ABS Index EXPECTED RATING SENSITIVITIES Unexpected decreases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, possibly resulting in negative rating action on the notes. Fitch has evaluated the sensitivity of the ratings to increased defaults and reduced recovery rates over the life of the transaction. Expected impact on note ratings from increased defaults: Final rating AAAsf/AAsf/Asf/BBBsf/BBsf/B+sf Increase defaults by 10%: AAAsf/AAsf/BBB+sf/BBBsf/BBsf/B+sf Increase defaults by 25%: AA+sf/A+f/BBB+sf/BBB-sf/BB-sf/B+sf Increase defaults by 50%: AA-sf/Asf/BBB+sf/BB+sf/B+sf/B+sf Expected impact on note ratings from decreased recovery rates and RV sale proceeds: Final rating AAAsf/AAsf/Asf/BBBsf/BBsf/B+sf Reduce recoveries and RV sale proceeds by 10%: AAAsf/AA-sf/Asf/BBBsf/BBsf/B+sf Reduce recoveries and RV sale proceeds by 25%: AAAsf/AA-sf/A-sf/BBB-sf/BB-sf/B+sf Reduce recoveries and RV sale proceeds by 50%: AAAsf/A+sf/BBB+sf/BBB-sf/B+sf/B+sf Expected impact on note ratings from multiple factors: Final rating AAAsf/AAsf/Asf/BBBsf/BBsf/B+sf Increase defaults by 10%; reduce recoveries and RV sale proceeds by 10%: AAAsf/AA-sf/A-sf/BBB-sf/BB-sf/B+sf Increase defaults by 25%; reduce recoveries and RV sale proceeds by 25%: AAsf/A+sf/A-sf/BB+sf/B+sf/B+sf Increase defaults by 50%; reduce recoveries and RV sale proceeds by 50%: Asf/BBB+sf/BBB-sf/BBsf/B+sf/Bsf USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) disclosed in the offering document that relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016. DATA ADEQUACY As part of its ongoing monitoring, Fitch reviewed a small targeted sample of FleetPartners' origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Fitch sought to receive a third-party assessment conducted on the portfolio information, but at this time no assessment was available for this transaction. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. Key rating drivers and expected rating sensitivities are further discussed in the corresponding presale report entitled "FP Ignition 2017 - B Trust", published today. SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by KPMG as at 30 April 2017 Transaction documentation provided by Mayne Wetherell, the issuer's counsel. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Primary Analyst Spencer Wilson Associate Director +612 8256 0320 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney NSW 2000 Secondary Analyst David Carroll Director +612 8256 0333 Committee Chairperson Natasha Vojvodic Senior Director +612 8256 0350 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 17 Feb 2017) here Global Consumer ABS Rating Criteria (pub. 25 May 2017) here Global Consumer ABS Rating Criteria – EMEA and APAC Auto Residual Value Addendum (pub. 15 May 2017) here Global Rating Criteria for CLOs and Corporate CDOs (pub. 09 Sep 2016) here Global Structured Finance Rating Criteria (pub. 03 May 2017) here SME Balance Sheet Securitisation Rating Criteria (pub. 03 Mar 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 23 May 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Related Research FP Ignition 2017 - B Trust - Appendix here Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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