CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the following series of Business Loan Express SBA Loan-Backed Adjustable-Rate Notes, series 2001-2 (2001-2) and series 2002-1 (2002-1); with a Stable Outlook as shown:
--Class A at 'CCsf', RE 100%;
--Class M at 'Csf', RE 100%.
--Class A at 'BBBsf'; Outlook Stable;
--Class M at 'BBsf'; Outlook Stable.
KEY RATING DRIVERS
BLX 2001-2's affirmation for class A and M 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 reflects the increased CE available, as the reserve balance has increased since last review. Fitch maintains the Stable Outlook as the CE is expected to provide sufficient protection from losses and future obligor concentrations.
In reviewing the transactions, Fitch took into account analytical considerations outlined in our 'Global Structured Finance Rating Criteria', issued July 2015, including asset quality, CE, financial structure, legal structure, and originator and servicer quality.
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 Fitch's 'Criteria for Rating U.S. Equipment Lease and Loan ABS', dated Dec 2015. 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 modeled 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 2014 in determining the ratings.
Additionally, Fitch's analysis incorporated a review of collateral characteristics, 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 cash flow 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 used is consistent with that of other commercial ABS transactions.
While the obligor concentration approach was the primary driver, its results were compared to the stressed loss 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.
Unanticipated increases in the frequency of defaults and loss severity could produce loss levels higher than the current projected losses and impact available loss coverage and obligor coverage. Lower loss coverage could impact ratings and Rating Outlooks, depending on the extent of the decline in coverage. Should performance significantly deteriorate, the decline in loss coverage could negatively impact current ratings.
DUE DILIGENCE USAGE
No-third party due diligence was received in connection with this review.
Additional information is available at www.fitchratings.com
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)
Criteria for Rating U.S. Equipment Lease and Loan ABS (pub. 03 Dec 2015)
Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Dodd-Frank Rating Information Disclosure Form