CHICAGO--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Wheels SPV 2, LLC, Series 2014-1 (US ABS)
Fitch Ratings expects to assign the following ratings and Rating Outlooks to the Wheels SPV 2, LLC, Series 2014-1 notes:
--$122,000,000 class A-1 notes 'F1+sf';
--$308,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$53,600,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$7,800,000 class B notes 'AAsf'; Outlook Stable;
--$11,700,000 class C notes 'A-sf'; Outlook Stable.
KEY RATING DRIVERS
Strong Credit Quality Obligors: Approximately 67% of the portfolio is rated by Fitch or another Nationally Recognized Statistical Rating Organization (NRSRO). As such, 33% is unrated, an increase from 29% in the 2012-1 transaction. In its analysis, Fitch assumed a 'B' rating for unrated obligors. While the pool is generally consistent with 2012-1, a decrease in investment grade obligors and increase in non-rated obligors has led to an increase in overall loss expectations.
Consistent Concentrations: Both obligor and industry concentrations are consistent with 2012-1. The top 20 obligors by balance represent 49%, unchanged from 2012-1.
Low Delinquency and Loss History: Wheels' historical managed portfolio and prior transaction delinquency and loss experience is low, even during periods marked by elevated levels in other consumer and commercial asset classes.
Minimal Residual Risk: The 2014-1 leases are all open-ended, meaning lessees bear residual risk. Therefore, the trust is only exposed to wholesale market risk in the event of an obligor default. Even then, vehicle dispositions have largely resulted in gains relative to book value due to conservative amortization and substantial vehicle discounts obtained by Wheels.
Sufficient Credit Enhancement (CE): CE has increased for the class A and B notes versus the 2012-1 transaction, while class C CE has declined. Total CE is sufficient to support loss levels consistent with expected ratings of 'AAAsf', 'AAsf', and 'A-sf', for class A, B, and C notes, respectively.
Quality Origination, Underwriting, and Servicing Platform: Wheels, Inc. has an investment-grade rating of 'A/F1' by Fitch and has demonstrated strong abilities as originator, underwriter, and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.
Unanticipated increases in the frequency of defaults and transaction fees, or decreases in recovery rates, 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 Wheels 2014-1 to increased default levels and servicing fees, as well as lower recovery rates for the truck component of the collateral pool, over the life of the transaction. Fitch's analysis found that the transaction displays relatively little sensitivity to increased servicing fees and decreased truck recovery rates. In both cases, the notes showed rating sensitivity of no more than one rating category. The transaction shows significantly more sensitivity to higher default rates, which Fitch stressed by assuming all unrated obligors carry a 'CCC' rating.
The presale report is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 2013);
--'Criteria for Rating U.S. Auto Lease ABS' (April 2014);
--'Global Rating Criteria for Corporate CDOs' (August 2013);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 2013);
--'Criteria for Servicing Continuity Risk in Structured Finance' (July 2013);
--'Structured Finance Tranche Thickness Metrics' (July 2011);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (January 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Criteria for Rating U.S. Auto Lease ABS
Global Rating Criteria for Corporate CDOs
Counterparty Criteria for Structured Finance and Covered Bonds
Criteria for Servicing Continuity Risk in Structured Finance
Structured Finance Tranche Thickness Metrics
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds