November 8, 2017 / 11:44 AM / a year ago

Fitch Assigns First Swiss Mobility 2017-2 AG Expected Ratings

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: First Swiss Mobility 2017-2 AG here FRANKFURT/LONDON, November 08 (Fitch) Fitch Ratings has assigned First Swiss Mobility 2017-2 AG's asset-backed notes the following expected ratings: Class A notes: 'AAA(EXP)sf'; Outlook Stable Class B notes: 'AA+(EXP)sf'; Outlook Stable Class C notes: 'A+(EXP)sf'; Outlook Stable Subordinated loan: not rated The transaction is a securitisation of auto lease receivables to Swiss private and commercial customers, originated by Multilease AG, which is wholly owned by Emil Frey Holding AG. A three-year revolving pool of CHF330 million will be financed through proceeds from the notes and a subordinated loan. Proceeds from the subordinated loan are also applied towards funding a reserve fund. The notes and receivables are denominated in Swiss francs and pay fixed interest rates. The assignment of the final rating is contingent on the receipt of final documents conforming to information already received. KEY RATING DRIVERS Residual Value Drives Risk: The securitised lease payments include the residual value (RV) at contract maturity. The RV portion can increase up to 40% of the overall pool during the replenishment period. Dealers are obliged to pay the contractual RV to the issuer. However, a dealer default would expose the issuer to the risk of RV losses when used vehicle prices decline. Fitch assumes 'AAA' RV losses of 10.2% in the most stressful scenario. Low Historical Defaults: The default rates in the originator's total book have been at low levels. Fitch has assigned a weighted average default base case of 1.1% to the transaction pool, at the lower end of the assumptions assigned to comparable Swiss transactions. Fitch accounted for a possible increase in defaults in a stressed environment by assigning a higher multiple of 7.0x at 'AAA'. Overall instalment losses are 5.4% at 'AAA'. Revolving Period Risks Addressed: The replenishment period exposes investors to an increased risk of adverse economic developments, pool migration towards more risky characteristics and a change in Multilease's origination standards. In Fitch's view, the combination of performance triggers is adequate to stop the revolving period early in case of performance deterioration. Fitch based its portfolio analysis on a stressed portfolio composition, in line with the replenishment limits. Servicing Continuity Adequate: The servicer is not rated by Fitch and there will be no back-up servicer in place from closing. However, Fitch considers servicing continuity risk to be sufficiently addressed. A replacement servicer facilitator is contracted and will use best efforts to appoint a substitute servicer should Multilease fail to perform its duties or become insolvent. In addition, the non-amortising cash reserve provides adequate liquidity. The agency further considers commingling risk covered by the available credit enhancement (CE). RATING SENSITIVITIES Expected impact on the note rating of increased defaults (class A/class B/class C): Current rating: 'AAAsf'/'AA+sf'/'A+sf' Increase base case defaults by 10%: 'AAAsf'/'AA+sf'/'A+sf' Increase base case defaults by 25%: 'AAAsf'/'AAsf'/'Asf' Increase base case defaults by 50%: 'AA+sf'/'AAsf'/'Asf' Expected impact on the note rating of decreased recoveries (class A/class B/class C): Current rating: 'AAAsf'/'AA+sf'/'A+sf' Reduce base case recovery by 10%: 'AAAsf'/'AA+sf'/'A+sf' Reduce base case recovery by 25%: 'AAAsf'/'AAsf'/'Asf' Reduce base case recovery by 50%: 'AAAsf'/'AAsf'/'Asf' Expected impact on the note rating of increased used car market value stress (class A/class B/class C): Current rating: 'AAAsf'/'AA+sf'/'A+sf' Reduce base case recovery and increase market value decline (MVD) by 10%: 'AAAsf'/'AAsf'/'Asf' Reduce base case recovery and MVD by 25%: 'AA+sf'/'A+sf'/'BBB+sf' Reduce base case recovery and MVD by 50%: 'AA-sf'/'A-sf'/'BBB-sf Fitch considers the sensitivities above to also provide an indication on rating changes upon a potential deterioration of used car prices of vehicles equipped with diesel engines (see "Fitch: European Diesel Restrictions Could Hit Used Car Prices"). The originator provided Fitch with a quantification of the total diesel share in the portfolio of about one-third of the portfolio. Assuming a decrease of 25% in diesel vehicles' recovery proceeds and an increase of 25% in diesel vehicles' MVD assumption as sensitivity, while leaving assumptions for non-diesel vehicles unchanged, the resulting rating sensitivity lies within the original rating and 10% standard sensitivities (applied to the entire pool) above. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of Multilease's 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. 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. SOURCES OF INFORMATION The information below was used in the analysis. - Quarterly volume-based default data from 1Q11-2Q17, split by customer type and asset condition - Quarterly recovery data from 1Q11-2Q17, split by customer type and asset condition - Monthly delinquency and prepayment data from January 2011-June 2017 for the total lease book - Portfolio stratifications and amortisation profile provided by Multilease for the preliminary pools as of 30 June 2017, 30 September 2017 and 31 October 2017 - RV sales proceeds in comparison to contractual RVs, covering 2011 to 2016 - Multilease's RV forecast comparison against Eurotax forecast for selected models, as of 2016 and September 2017 - Multilease's RV forecast comparison against captive forecast for selected models, dated 2008, 2012 and 2016 - Mutlilease's key financial numbers as of 31 December 2016 MODELS The model below was used in the analysis. Click on the link for a description of the model. <a href=" ">EMEA Cash Flow Model. REPRESENTATIONS AND WARRANTIES A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which 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. Contacts: Primary Analyst Marina Nebrat Analyst +49 69 768076 260 Fitch Deutschland GmbH Neue Mainzer Strasse 46-50 60311 Frankfurt am Main Secondary Analyst Damien Zarowsky Associate Director +33 1 4429 9139 Committee Chairperson Eberhard Hackel Senior Director +49 69 768076 117 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email:; Adrian Simpson, London, Tel: +44 203 530 1010, Email: Additional information is available on 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 Structured Finance Rating Criteria (pub. 03 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Related Research First Swiss Mobility 2017-2 AG - Appendix here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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