Fitch Expects to Rate Ally Auto Receivables Trust 2014-SN1; Presale Issued
NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to assign the following ratings to Ally Auto Receivables Trust 2014-SN1:
--$203,000,000 class A-1 asset-backed notes 'F1+sf';
--$470,000,000 class A-2 asset-backed notes 'AAAsf'; Outlook Stable;
--$250,000,000 class A-3 asset-backed notes 'AAAsf'; Outlook Stable.
--$85,700,000 class A-4 asset-backed notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Strong Collateral Quality: The pool consists of strong quality leases with a WA FICO score of 763, seasoning of 10.8 months, and a diversified residual value (RV) maturity schedule. Truck and SUV collateral, while still representing a large concentration, has decreased from 2013-SN1. Of concern, securitized residuals have increased from the prior transaction to 73.15%.
Sufficient CE Structure: 2014-SN1 incorporates a sequential-pay structure. Initial CE to the class A notes is 18.75%, building to 21.75%. Available enhancement is sufficient to support Fitch's 'AAAsf' stressed credit and residual loss assumptions of 4.25% and 29.7%, respectively.
Unhedged Floating-Rate Note: The class A-2b notes are expected to pay interest on a floating-rate basis, while the assets pay a fixed rate, and will not be hedged. As such, Fitch has stressed the transaction structure using its 'AAA' LIBOR-up stressed assumptions.
Improved Loss Performance: Credit and residual losses on Ally's portfolio have declined significantly from the elevated levels seen in 2008 and 2009. This is a result of strong obligor credit quality and a recently solid wholesale used vehicle market, leading to higher recovery rates and residual realization.
Stable Corporate Health: Fitch rates Ally Financial Inc., the servicer, 'BB' with a Stable Rating Outlook. Fitch believes Ally to be a capable originator, underwriter, and servicer, as evidenced by historical performance of its managed portfolio and prior securitizations.
Evolving Wholesale Market: The U.S. wholesale vehicle market has remained strong in recent years. However, increasing off-lease vehicle supply and pressure from increased production levels could lead to decreased residual realizations during the life of the transaction.
Unanticipated decreases in the value of returned vehicles and/or increases in the frequency of defaults and loss severity on defaulted receivables 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 Ally Auto Receivables Trust 2014-SN1 to increased credit and residual losses over the life of the transaction. Fitch's analysis found that the transaction displays relatively little sensitivity to increased defaults and credit losses, showing downgrades of only one rating category even under Fitch's severe (2.5 times base case loss) scenario. The transaction shows significantly more sensitivity to residual loss volatility, though even under Fitch's severe scenario, the class A notes would be expected to retain an investment grade rating.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Feb. 20, 2014. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Ally Auto Receivables Trust 2014-SN1 - Appendix'. This R&W is 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 April 17, 2012.
The presale report is available to all investors on Fitch's website at 'www.fitchratings.com'. For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance, and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'email@example.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Auto Lease ABS' (April 30, 2013);
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (April 17, 2012).
--'Ally Auto Receivables Trust 20132014-SN1 - Appendix' (Feb. 20, 2014).
Applicable Criteria and Related Research: Ally Auto Receivables Trust 2014-SN1 (US ABS)
Criteria for Rating U.S. Auto Lease ABS
Global Structured Finance Rating Criteria
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended