Fitch Affirms Two Business Loan Express ABS Transactions

CHICAGO--()--Fitch Ratings has affirmed Business Loan Express SBA loan-backed adjustable-rate notes, series 2001-2 (2001-2) and series 2002-1 (2002-1) with Rating Outlook revised to Stable from Negative

KEY RATING DRIVERS

BLX 2001-2's affirmation reflects the recent stable performance of the transaction as credit enhancement (CE) has built for class A and M notes. However, the transaction remains under-collateralized and late-stage delinquencies remain elevated. For these reasons, default is considered a real possibility. Class A and M notes are expected to have a 100% recovery of current note balance.

BLX 2002-1's affirmation for class A and M at 'BBBsf' and 'BBsf' respectively, reflects the increased CE available as the reserve balance has increased since last review. Fitch revised the Outlook to Stable from Negative as delinquencies have decreased and CE has built.

RATING METHODOLOGY

In reviewing the transactions, Fitch took into account analytical considerations outlined in Fitch's 'Global Structured Finance Rating Criteria', issued March 31, 2015, including asset quality, CE, financial structure, legal structure, and originator and servicer quality.

Fitch's analysis incorporated a review of collateral characteristics, in particular focusing on delinquent and defaulted loans within the pool. All loans over 60 days delinquent were deemed defaulted loans. The defaulted loans were applied loss and recovery expectations based on collateral type and historical recovery performance to establish an expected net loss assumption for the transaction. Fitch stressed the cashflow generated by the underlying assets by applying its expected net loss assumption. Furthermore, Fitch applied a loss multiplier to evaluate break-even cash flow runs to determine the level of expected cumulative losses the structure can withstand at a given rating level. The loss multiplier scale utilized is consistent with Fitch's 'Criteria for Rating U.S. Equipment Lease and Loan ABS', dated Dec 23, 2014.

Additionally, Fitch's analysis focused on concentration risks within the pool, by evaluating the impact of the default of the largest performing obligors. The obligor concentration analysis is consistent with the previously mentioned equipment criteria. The analysis compares expected loss coverage relative to the default of a certain number of the largest obligors. The required net obligor coverage varies by rating category. The required number of obligors covered ranges from 20 at 'AAA' to five at 'B'. Fitch applied loss and recovery expectations based on collateral type and historical recovery performance to the largest performing obligors commensurate with the individual rating category. The expected loss assumption was then compared to the loss coverage available to the outstanding notes given Fitch's expected losses on the currently delinquent loans. Fitch also applied the 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' dated May 28, 2014 in determining the ratings.

While the stresses' loss approach was the primary driver, its results were compared to the obligor concentration approach and qualitative factors such as the results of these approaches compared to prior reviews, recent performance, and available CE. The rating actions taken were ultimately the result of a combination of these factors. Fitch will continue to closely monitor these transactions and may take additional rating action in the event of changes in performance and CE measures.}

RATING SENSITIVITIES

If the delinquent loans in BLX 2001-2 experienced higher than assumed recoveries, the class A note has the potential to pay in full. However, any significant increases to delinquencies or assumed loss severity may cause further downgrades and lower recovery estimates. The Stable Outlook in 2002-1 reflects the significant CE available to the notes. As a result, Fitch expects stable ratings on classes unless there is significantly higher than assumed losses. While strong performance of the collateral would be a positive, positive rating movement in the near term is currently not likely due to the significant remaining term of the collateral.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following ratings:

Business Loan Express SBA Loan-Backed Adjustable-Rate Notes, series 2001-2

--Class A at 'CCsf', RE 100%;

--Class M at 'Csf', RE 100%.

Business Loan Express SBA Loan-Backed Adjustable-Rate Notes, series 2002-1

--Class A at 'BBBsf'; Outlook to Stable from Negative;

--Class M at 'BBsf'; Outlook to Stable from Negative.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Structured Finance Rating Criteria (pub. 31 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=986482

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=986482

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Surveillance Analyst
Primary Analyst
Thomas Kaiser, CPA
Associate Director
+1-312-368-3338
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0214
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Surveillance Analyst
Primary Analyst
Thomas Kaiser, CPA
Associate Director
+1-312-368-3338
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0214
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com