September 20, 2017 / 10:29 AM / in a month

Fitch Takes Positive Rating Actions on China ABS on Criteria Change

(The following statement was released by the rating agency) HONG KONG/SHANGHAI, September 20 (Fitch) Fitch Ratings has upgraded 16 China auto ABS tranches and placed another five tranches on Rating Watch Positive (RWP). The rating actions follow the publication of an updated Structured Finance and Covered Bonds Country Risk Rating Criteria on 18 September 2017. China's notching limit was changed due to a stronger assessment of the country's structured finance market since 2014 and an improvement in Fitch's Macro Prudential Indicator for China to one from three in January 2017. These 21 tranches are from 13 Fitch-rated auto ABS transactions. A full list of rating actions is at the end of this release. KEY RATING DRIVERS The change in country risk criteria resulted in China's limit increasing to three notches above its Long-Term Local Currency Issuer Default Rating (IDR) of 'A+' from two notches. The highest achievable rating for structured finance and covered bond transactions in China has been revised to 'AA+sf' from 'AAsf'. For more details on the country risk criteria update, see <a href="https://www.fitchratings.com/site/re/903496">Structured Finance and Covered Bonds Country Risk Rating Criteria, dated 18 September 2017. Based on the revised default multiples and recovery haircuts, Fitch has identified 21 tranches that are positively affected due to this criteria change. Sixteen out of the 21 tranches have been upgraded as the credit enhancement available can support 'AA+sf' rating level stresses. Fitch has placed the remaining five tranches on RWP pending further cash flow analysis. Fitch expects to resolve the rating watch no later than 18 March 2018. RATING SENSITIVITIES For the upgraded tranches, Fitch sees asset performance as being in line with its expectations and the rapid build-up in credit enhancement means that the possibility of downgrade is limited. For the tranches placed on RWP, rating sensitivity analysis will be conducted when the rating watch is resolved. 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. DATA ADEQUACY Fitch has not conducted a review of the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio as part of its ongoing monitoring. 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 Monthly trustee reports as of August 2017. The issuers have informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. The full list of rating actions is shown below: Autopia China 2017-1 Retail Auto Mortgage Loan Securitization Trust (Autopia China 2017-1) Class A upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class B rating of 'Asf' placed on RWP Driver China three Trust Class A upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class B upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Driver China six Trust Class A upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class B's rating of 'A-sf' placed on RWP Driver China seven Trust Class A upgraded to 'AA+(EXP)sf' from 'AA(EXP)sf'; Outlook Stable Class B upgraded to 'A(EXP)sf' from 'A-(EXP)sf'; Outlook Stable Fuyuan 2016-1 Retail Auto Mortgage Loan Securitization Trust (Fuyuan 2016-1) Class A upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class B's rating of 'AA-sf' placed on RWP Fuyuan 2017-1 Retail Auto Mortgage Loan Securitization Trust (Fuyuan 2017-1) Class A upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class B's rating of 'AA-sf' placed on RWP Fuyuan 2017-2 Retail Auto Mortgage Loan Securitization Trust (Fuyuan 2017-2) Class A upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class B's rating of 'AA-sf' placed on RWP Rongfa 2017-1 Retail Auto Loan Securitization Trust (Rongfa 2017-1) Senior class upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Rongteng 2017-1 Retail Auto Mortgage Loan Securitization Trust (Rongteng 2017-1) Senior class upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Shanghe 2016-1 Retail Auto Mortgage Loan Securitization Trust (Shanghe 2016-1) Class A2 upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Shanghe 2017-1 Retail Auto Mortgage Loan Securitization Trust (Shanghe 2017-1) Class A1 upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class A2 upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Silver Arrow China 2017-1 Retail Auto Loan Asset Backed Notes Trust (Silver Arrow China Loan 2017-1) Class A upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Silver Arrow China 2017-2 Retail Auto Loan Asset Backed Notes Trust (Silver Arrow China Loan 2017-2) Class A upgraded to 'AA+(EXP)sf' from 'AA(EXP)sf'; Outlook Stable Contacts: Lead Surveillance Analyst Jensen Hui (Autopia China 2017-1; Driver China three Trust; Driver China six Trust; Fuyuan 2016-1; Fuyuan 2017-1; Fuyuan 2017-2) Analyst +852 2263 9956 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Anthony Liu (Silver Arrow China Loan 2017-1; Rongfa 2017-1) Analyst +852 2263 9968 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Yaxin Dai (Shanghe 2016-1; Shanghe 2017-1) Associate Director +852 2263 9976 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Grace Li (Rongteng 2017-1) Director +852 2263 9936 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Primary Analyst Anthony Liu (Driver China seven Trust) Analyst +852 2263 9968 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Hilary Tan (Silver Arrow China Loan 2017-2) Senior Director +852 2263 9904 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Kan Zhou (Driver China seven Trust; Silver Arrow China Loan 2017-2) Associate Director +86 21 5097 3051 Committee Chairperson Ben McCarthy Managing Director +612 8256 0388 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Criteria for Country Risk in Global Structured Finance and Covered Bonds - Effective from 26 September 2016 to 18 September 2017 (pub. 26 Sep 2016) here 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 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 Country Risk Rating Criteria (pub. 18 Sep 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) 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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