Fitch to Rate Wheels SPV 2, LLC, Series 2014-1; Issues Presale

CHICAGO--()--Link to Fitch Ratings' Report: Wheels SPV 2, LLC, Series 2014-1 (US ABS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748100

Fitch Ratings expects to assign the following ratings and Rating Outlooks to the Wheels SPV 2, LLC, Series 2014-1 notes:

--$122,000,000 class A-1 notes 'F1+sf';

--$308,000,000 class A-2 notes 'AAAsf'; Outlook Stable;

--$53,600,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$7,800,000 class B notes 'AAsf'; Outlook Stable;

--$11,700,000 class C notes 'A-sf'; Outlook Stable.

KEY RATING DRIVERS

Strong Credit Quality Obligors: Approximately 67% of the portfolio is rated by Fitch or another Nationally Recognized Statistical Rating Organization (NRSRO). As such, 33% is unrated, an increase from 29% in the 2012-1 transaction. In its analysis, Fitch assumed a 'B' rating for unrated obligors. While the pool is generally consistent with 2012-1, a decrease in investment grade obligors and increase in non-rated obligors has led to an increase in overall loss expectations.

Consistent Concentrations: Both obligor and industry concentrations are consistent with 2012-1. The top 20 obligors by balance represent 49%, unchanged from 2012-1.

Low Delinquency and Loss History: Wheels' historical managed portfolio and prior transaction delinquency and loss experience is low, even during periods marked by elevated levels in other consumer and commercial asset classes.

Minimal Residual Risk: The 2014-1 leases are all open-ended, meaning lessees bear residual risk. Therefore, the trust is only exposed to wholesale market risk in the event of an obligor default. Even then, vehicle dispositions have largely resulted in gains relative to book value due to conservative amortization and substantial vehicle discounts obtained by Wheels.

Sufficient Credit Enhancement (CE): CE has increased for the class A and B notes versus the 2012-1 transaction, while class C CE has declined. Total CE is sufficient to support loss levels consistent with expected ratings of 'AAAsf', 'AAsf', and 'A-sf', for class A, B, and C notes, respectively.

Quality Origination, Underwriting, and Servicing Platform: Wheels, Inc. has an investment-grade rating of 'A/F1' by Fitch and has demonstrated strong abilities as originator, underwriter, and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and transaction fees, or decreases in recovery rates, 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 Wheels 2014-1 to increased default levels and servicing fees, as well as lower recovery rates for the truck component of the collateral pool, over the life of the transaction. Fitch's analysis found that the transaction displays relatively little sensitivity to increased servicing fees and decreased truck recovery rates. In both cases, the notes showed rating sensitivity of no more than one rating category. The transaction shows significantly more sensitivity to higher default rates, which Fitch stressed by assuming all unrated obligors carry a 'CCC' rating.

The presale report is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 2013);

--'Criteria for Rating U.S. Auto Lease ABS' (April 2014);

--'Global Rating Criteria for Corporate CDOs' (August 2013);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 2013);

--'Criteria for Servicing Continuity Risk in Structured Finance' (July 2013);

--'Structured Finance Tranche Thickness Metrics' (July 2011);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (January 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Criteria for Rating U.S. Auto Lease ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746763

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715492

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155

Criteria for Servicing Continuity Risk in Structured Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=712935

Structured Finance Tranche Thickness Metrics

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646951

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725537

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=828977

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Peter Manofsky
Director
+1-312-368-2068
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
or
Secondary Analyst
Thomas Kaiser, CPA
Associate Director
+1-312-368-3338
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0241
or
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Peter Manofsky
Director
+1-312-368-2068
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
or
Secondary Analyst
Thomas Kaiser, CPA
Associate Director
+1-312-368-3338
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0241
or
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com