NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings to Chrysler Capital Auto Receivables Trust (CCART) 2016-B:
--$168,000,000 class A-1 asset-backed notes 'F1+sf';
--$260,000,000 class A-2 asset-backed notes 'AAAsf'; Outlook Stable;
--$220,000,000 class A-3 asset-backed notes 'AAAsf'; Outlook Stable;
--$82,030,000 class A-4 asset-backed notes 'AAAsf'; Outlook Stable;
--$29,380,000 class B asset-backed notes 'AAsf'; Outlook Stable;
--$47,460,000 class C asset-backed notes 'Asf'; Outlook Stable;
--$33,910,000 class D asset-backed notes 'BBBsf'; Outlook Stable.
KEY RATING DRIVERS
Limited Performance History: Chrysler Capital (CC) was founded in 2013; thus, performance data are limited and were not utilized by Fitch to determine the base case loss proxy. Fitch utilized conservative 2006 - 2008 vintage securitization loss data from the DaimlerChrysler Auto Trust (DCAT) platform to derive a loss proxy for this portion of the pool. The loss proxy has increased relative to 2016-A due to weaker performance observed on outstanding CCART transactions.
Performance Weakening: The Santander Consumer USA Inc. (SC) and CC portfolios, along with CCART securitizations, recorded rising delinquencies and cumulative net losses (CNL) year-over-year (YoY) through 2015 and the second quarter of 2016. Fitch took this into account when deriving the 2016-B proxy. CCART pools have certain prime borrower characteristics, but Fitch classifies the platform as midprime based on historical loss performance to date and, thus, applied midprime loss multiples in its analysis.
Stable CC/SC Receivables Mix: CC originations total 88% of the pool, while core SC nonprime originations total 12%, consistent with recent pools. Fitch utilized conservative nonprime core SC loss data to derive a loss proxy for the core SC portion of the pool.
Sufficient Credit Enhancement (CE): Initial hard CE totals 19.5% for the class A notes, down from 20.0% in 2016-A. CE for the class B through D notes is also marginally lower versus 2016-A. Excess spread is 4.89%, consistent with 2016-A. CE is sufficient to cover Fitch's 5.50% base case proxy and modeled net loss levels for all the notes.
Consistent Collateral Pool: The collateral is fairly consistent with prior pools. The weighted average (WA) FICO score is 712, WA loan-to-value (LTV) is 106% and new vehicles total 73.3%. Commercial contracts, which typically perform stronger than retails contracts, total 9.0% of the pool. The pool's collateral characteristics comprise elements of prime and nonprime consumer credits.
Increasing Extended-Term Loans: Loans with terms of 60-plus months total 80.8%, down from 2016-A and prior transactions. However, 73 to 75 month contracts total 21.6% of the pool, the highest level observed to date for the platform. Fitch applied a stress to the loss proxy to account for the risk posed by these loans due to limited performance history and weaker loan attributes and credit quality.
Stable Corporate Health: SC has been profitable each year since 2007, including recent years. Fitch rates Santander, majority owner of SC via Santander Holding USA, Inc. (SHUSA), 'A-/F2'/Stable Outlook.
Consistent Origination/Underwriting/Servicing: Along with its CC division, SC demonstrates adequate abilities as originator, underwriter and servicer, as evidenced by historical portfolio and securitization performance. Fitch deems SC capable to service this series.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of SC 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 Fitch taking negative rating actions on the notes.
Fitch evaluated the sensitivity of the ratings assigned to 2016-B to increased credit losses over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and credit losses. We saw a potential downgrade of one category under Fitch's moderate (1.5x base case loss) scenario, especially for the subordinate bonds. The notes could experience downgrades of up to two rating categories, potentially leading to distressed ratings, under Fitch's severe (2x base case loss) scenario.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence focused on comparing or re-computing certain information with respect to 145 retail and 30 commercial receivables from the statistical data file. Fitch considered this information in its analysis, and the findings did not have an impact on the analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link at the bottom of the related rating action commentary.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled 'Chrysler Capital Auto Receivables Asset Trust 2016-B -- Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated May 31, 2016.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
https://www.fitchratings.com/site/re/886006
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
Rating Criteria for U.S. Auto Loan ABS (pub. 21 Mar 2016)
https://www.fitchratings.com/site/re/878723
Related Research
Chrysler Capital Auto Receivables Trust 2016-B - Appendix
https://www.fitchratings.com/site/re/889406
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014369
ABS Due Diligence Form 15E 1
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014369
Endorsement Policy
https://www.fitchratings.com/regulatory
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT 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.
Copyright (c) 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.