Fitch: Prime U.S. Auto ABS May See Slightly More Upgrades

CHICAGO--()--Link to Fitch Ratings' Report: Prime Auto Loan ABS: In the Pole Position http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746960

Upgrades for U.S. auto ABS, the pace of which is already solid, may trend slightly higher in the coming months, according to Fitch Ratings in a new report.

Positive rating actions for Fitch-rated prime auto ABS far surpass negative rating movements. Since 2006, Fitch has upgraded 406 prime auto ABS tranches and downgraded only eight (all in 2008-2009). The first quarter of this year has fared equally well so far, with Fitch upgrading an additional 14 subordinate prime auto ABS tranches. Despite signs of moderating credit quality, prime auto ABS collateral remains exceptionally strong along with the structures themselves, according to Senior Director Du Trieu.

'The fact that prime auto ABS bonds were being upgraded even when the US economy was at its weakest level since the Great Depression speaks to the strength of the structures,' said Trieu. 'This may position prime auto ABS for a slightly higher rate of upgrades this year as the US economic recovery picks up in intensity.'

The extremely weak wholesale market of a few years ago also pressured recovery rates on prime auto ABS. While current recovery rates for auto ABS have declined slightly from high levels in 2011-2012, 'significant declines in recovery rates are unlikely in the foreseeable future so long as gas prices and vehicle inventory levels remain stable,' said Trieu. Therefore, loss severity on prime auto ABS is expected to remain steady, resulting in a potential for increased positive rating actions.

'Prime Auto Loan ABS: In the Pole Position' is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at 'www.fitchratings.com'.

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Contacts

Fitch Ratings
Media Relations
Sandro Scenga, New York
Tel: +1 212-908-0278
Email: sandro.scenga@fitchratings.com
or
Du Trieu
Senior Director
+1-312-368-2091
Fitch Ratings, Inc., 70 W. Madison Street, Chicago, IL 60647
or
John H. Bella, Jr.
Managing Director
+1-212-908-0243

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Contacts

Fitch Ratings
Media Relations
Sandro Scenga, New York
Tel: +1 212-908-0278
Email: sandro.scenga@fitchratings.com
or
Du Trieu
Senior Director
+1-312-368-2091
Fitch Ratings, Inc., 70 W. Madison Street, Chicago, IL 60647
or
John H. Bella, Jr.
Managing Director
+1-212-908-0243