CHICAGO--(BUSINESS WIRE)--Link to Fitch Ratings' Report: GM Financial Automobile Leasing Trust 2014-2 (US ABS)
Fitch Ratings expects to assign the following ratings and Rating Outlooks to GM Financial Automobile Leasing Trust 2014-2:
--$95,000,000 class A-1 asset-backed notes 'F1+sf';
--$240,000,000 class A-2 asset-backed notes 'AAAsf'; Outlook Stable;
--$240,000,000 class A-3 asset-backed notes 'AAAsf'; Outlook Stable;
--$59,290,000 class A-4 asset-backed notes 'AAAsf'; Outlook Stable;
--$29,840,000 class B asset-backed notes 'AAsf'; Outlook Stable;
--$23,250,000 class C asset-backed notes 'Asf'; Outlook Stable;
--$21,700,000 class D asset-backed notes 'BBBsf'; Outlook Stable
KEY RATING DRIVERS
Decline in Collateral Quality: Relative to GMALT 2014-1, 2014-2 features a lower WA non-zero obligor FICO score of 721 and a decline in the concentration of cars to 37.5%. Mitigating these movements is a material decrease in the undiscounted base residual value (RV) to 65.84% of the securitization value (SV), which is below most recent issuances on comparable platforms.
New Leasing Platform: GMF began originating prime auto leases in December 2010. Therefore, empirical data is limited. Fitch supplemented the GMF data with proxy data from comparable origination platforms to derive a credit loss expectation. While RV performance data for GM vehicles was utilized, an additional residual loss haircut was employed to account for potential variability in auction proceeds owing to the servicer.
Sufficient CE Structure: Initial hard credit enhancement (CE) totals 18.65%, 14.80%, 11.80% and 9% for the class A, B, C and D notes respectively. These levels are down slightly from 2014-1. Based on a 1.60% credit loss expectation stressed for each rating category and stressed RV loss expectations ranging from 34%-19.4% for 'AAAsf' to 'BBBsf', available credit enhancement is sufficient to support each expected rating.
Evolving Wholesale Market: The U.S. wholesale vehicle market has been normalizing following very strong performance in recent years. Fitch expects that increasing off-lease vehicle supply and pressure from increased production levels will lead to decreased residual realizations during the life of the transaction.
Stable Corporate Health: Fitch rates General Motors Financial Company, Inc. (the parent company) 'BB+' with a Positive Rating Outlook. Fitch believes GMF to be a capable originator, underwriter, and servicer, as evidenced by historical performance of its managed portfolio.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of GMF would not impair the timeliness of payments on the securities.
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. This could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to GM Financial Automobile Leasing Trust 2014-2 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 between one and less than one rating category even under Fitch's severe (2.5 times base case loss). The transaction shows more sensitivity to residual loss volatility (though even under Fitch's severe scenario) the class A and B notes would be expected to retain an investment grade rating.
Key Rating Drivers and Rating Sensitivities are further detailed in Fitch's presale report, published today and available at 'www.fitchratings.com' or by clicking on the above link. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in GM Financial Automobile Leasing Trust 2014-2- 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 Global Structured Finance Transactions' .
Additional information is available on 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Auto Lease ABS' (April 24, 2014);
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (April 17, 2012);
--'GM Financial Automobile Leasing Trust 2014-2 - Appendix' (April 24, 2014).
Applicable Criteria and Related Research:
Criteria for Rating U.S. Auto Lease ABS
Global Structured Finance Rating Criteria
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions