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April 1 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings to GM Financial Automobile Leasing Trust 2014-1:
--$100,000,000 class A-1 asset-backed notes ‘F1+sf’;
--$235,000,000 class A-2 asset-backed notes ‘AAAsf’; Outlook Stable;
--$227,590,000 class A-3 asset-backed notes ‘AAAsf’; Outlook Stable;
--$65,000,000 class A-4 asset-backed notes ‘AAAsf’; Outlook Stable;
--$31,000,000 class B asset-backed notes ‘AAsf’; Outlook Stable;
--$23,240,000 class C asset-backed notes ‘Asf’; Outlook Stable;
--$23,240,000 class D asset-backed notes ‘BBBsf’; Outlook Stable.
Adequate Collateral Quality: The pool consists of both prime and non-prime quality leases with a WA non-zero FICO score of 728, 8 months of seasoning, a large concentration of cars and a diversified residual value (RV) maturity schedule. The undiscounted base RV of 69.78% of the securitization value (SV) is in line with recent issuances on comparable platforms.
New Leasing Platform: GMF began originating prime auto leases in October 2010, therefore empirical data reflects less than three years of performance. Fitch supplemented the GMF data with proxy data from comparable origination platforms to derive a credit loss expectation. While RV performance data for GM vehicles was utilized, an additional residual loss haircut was employed to account for potential variability in auction proceeds owing to the servicer.
Sufficient CE Structure: Initial hard credit enhancement (CE) totals 19.50%, 15.50%, 12.50% and 9.50% for the Class A, B, C and D Notes respectively. Based on a 1.50% credit loss expectation stressed for each rating category and stressed RV loss expectations ranging from 33.25% to 18.5% for ‘AAAsf’ to ‘BBBsf’, available credit enhancement is sufficient to support each expected rating.
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 realizations during the life of the transaction.
Stable Corporate Health: Fitch rates GM Financial Company, Inc., the Parent Company, ‘BB+’ with a Positive Rating Outlook. Fitch believes GMF to be a capable originator, underwriter, and servicer, as evidenced by historical performance of its managed portfolio.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of GMF would not impair the timeliness of payments on the securities.
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 and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to GM Financial Automobile Leasing Trust 2014-1 to increased credit and residual losses over the life of the transaction. Fitch’s analysis found that the transaction displays relatively little sensitivity to increased defaults and credit losses, showing downgrades between one and less than one rating category even under Fitch’s severe (2.5 times base case loss). The transaction shows more sensitivity to residual loss volatility, though even under Fitch’s severe scenario, the class A and B notes would be expected to retain an investment grade rating.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated April 1, 2014. Fitch’s analysis of the Representations and Warranties (R&W) of this transaction can be found in GM Financial Automobile Leasing Trust 2014-1- Appendix’. These R&W are compared to those of typical R&W for the asset class as detailed in the special report ‘Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions’ dated April 17, 2012.
The presale report is available to all investors on Fitch’s website at ‘www.fitchratings.com’. For more information about Fitch’s comprehensive subscription service FitchResearch, which includes all presale reports, surveillance, and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at ‘email@example.com’.
Link to Fitch Ratings’ Report: GM Financial Automobile Leasing Trust 2014-1 (US ABS)