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Fitch Rates Capital Auto Receivables Asset Trust 2014-3

NEW DELHI & SINGAPORE--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks to the notes issued by Capital Auto Receivables Asset Trust (CARAT) 2014-3:

--$255,000,000 class A-1 notes 'AAAsf'; Outlook Stable;

--$166,000,000 class A-2 notes 'AAAsf'; Outlook Stable;

--$166,000,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$56,400,000 class A-4 notes 'AAAsf'; Outlook Stable;

--$38,200,000 class B notes 'AAsf'; Outlook Stable;

--$36,190,000 class C notes 'Asf'; Outlook Stable;

--$32,170,000 class D notes 'BBBsf'; Outlook Stable;

--$28,150,000 class E notes 'NR'.

KEY RATING DRIVERS

Stable Collateral Characteristics: The 2014-3 pool is representative of non-prime collateral. The weighted average (WA) Fair Isaac Corp. (FICO) score is 632, WA APR of 7.87%, WA LTV is 100% and new vehicles total 63%, while 60+ month loan contracts (extended-term contracts) total 73%, all relatively consistent with recent pools.

One-Year Revolving Period Risk: The revolving structure introduces risk of collateral migrating to a weaker pool before the start of the amortization period, although additional receivables' eligibility criteria mitigate this risk. Fitch accounts for this risk in its derivation of the 5.50% base case loss proxy for 2014-3.

Adequate Credit Enhancement: Initial hard credit enhancement (CE) is consistent with all prior transactions. The reserve is 0.50% non-declining and initial overcollateralization (OC) is 3.25% (both of the initial pool balance) growing to a target of 4.75% post the revolving period. Excess spread totals 4.46% per annum, down from 2014-2 (Not Rated).

Stable Portfolio Performance: AFIN's non-prime U.S. auto loan portfolio exhibited improved performance in 2009-2013 relative to the weak 2006-2008 period, supported by the gradual improvement in the U.S. economy and healthy used vehicle values.

Stable Corporate Health: Fitch currently rates AFIN 'BB+/B' with a Stable Outlook. AFIN demonstrates solid capabilities as an originator, underwriter, and servicer, as evidenced by its historical non-prime portfolios and securitization performance.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of AFIN 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 rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to each class of CARAT 2014-3 to increased losses over the life of the transaction. Fitch's analysis found that each class of notes displays some sensitivity to increased defaults and losses, with some classes showing potential downgrades of up to two rating categories under Fitch's moderate (1.5x base case loss) scenario. Some classes of notes could experience downgrades of more than three rating categories under Fitch's severe (2x base case loss) scenario.

Key rating drivers and rating sensitivities are further detailed in the accompanying presale report at 'www.fitchratings.com' or by clicking on the above link.

Fitch's analysis of the Representation and Warranties (R&W) of this transaction can be found in 'Capital Auto Receivables Asset Trust 2014-3--Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in Fitch's April 17, 2012 special report, 'Representations, Warranties, and Enforcement Mechanisms in the Global Structured Finance Transactions'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

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

--'Global Structured Finance Rating Criteria'(May 2014);

--'Capital Auto Receivables Asset Trust 2014-3--Appendix' (August 2014).

Applicable Criteria and Related Research:

Capital Auto Receivables Asset Trust 2014-3 -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=758367

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Rating Criteria for U.S. Auto Loan ABS

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=863634

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Contacts

Fitch Ratings
Primary Analyst
Hylton Heard, +1 212-908-0214
Senior Director
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Secondary Analyst
Khadija El Mediouri, +1 212-908-9109
Analyst
or
Committee Chairperson
Brad Sohl, +1 212-908-0792
Senior Director
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Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com