Fitch Rates Mercedes-Benz Auto Receivables Trust 2014-1

NEW YORK--()--Fitch Ratings assigns the following ratings and Rating Outlooks to the notes issued by Mercedes-Benz Auto Receivables Trust (MBART) 2014-1:

--$295,000,000 class A-1 'F1+sf';

--$343,100,000 class A-2 'AAAsf'; Outlook Stable;

--$375,870,000 class A-3 'AAAsf'; Outlook Stable;

--$110,500,000 class A-4 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

Strong Collateral Quality: The weighted average (WA) Fair Isaac Corp. (FICO) score of 767 is consistent with recently issued MBART transactions and, combined with the strong internal credit-tier distribution, indicates a strong borrower.

Increased Used Vehicle Concentration: Concentrations of used vehicles increased to 72.43% in 2014-1 from 61.38% in 2013-1, representing the highest level in any MBART transaction to date. The increase in used vehicles has resulted in a higher WA loan-to-value (LTV) ratio for the 2014-1 pool, which could result in higher loss severities on defaulted loans.

Sufficient Credit Enhancement: Total initial hard credit enhancement (CE) for class A notes is 2.75%. Yield supplement overcollateralization (OC) will be used to boost the transaction's annual percentage rate (APR), providing expected excess spread of 3.02%. CE is sufficient to cover in excess of a 5.0x multiple of Fitch's base case expected lifetime cumulative net losses (CNLs) of 1%.

Strong Portfolio/Securitization Performance: Mercedes Benz Financial Services' (MBFS) portfolio and securitization performance has been improving with low delinquencies and losses over the past three years. Performance has been supported by the improving U.S. economic recovery and stable used vehicle values.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of Daimler or MBFS would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn could result in potential negative rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to Mercedes-Benz Auto Receivables Trust 2014-1 to increased losses over the life of the transaction. Fitch's analysis found that the class A notes display minimal sensitivity to a moderate increase in defaults and losses, showing potential downgrades of up to one notch, if at all, under Fitch's moderate (1.5x base case loss) scenario. However, class A notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.

Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying presale report, 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 20, 2014);

--'Rating Criteria for U.S. Auto Loan ABS' (April 7, 2014);

--'Structured Finance Tranche Thickness Metrics' (July 29, 2011).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Rating Criteria for U.S. Auto Loan ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738718

Structured Finance Tranche Thickness Metrics

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=838776

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Contacts

Fitch Ratings
Primary Analyst
Joyce Fargas
Director
+1-212-908-0824
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Brad Sohl
Senior Director
+1-212-908-0792
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Joyce Fargas
Director
+1-212-908-0824
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Brad Sohl
Senior Director
+1-212-908-0792
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com