NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to assign the following ratings to Porsche Innovative Lease Owner Trust 2015-1 (PILOT 2015-1):
--$134,000,000 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;
--$86,000,000 class A-4 asset-backed notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Strong Collateral Quality: PILOT 2015-1 has a WA FICO of 789 and comprises primarily 36-month leases. The pool is well seasoned and has a well-diversified RV maturity schedule.
Shifting Portfolio Composition: 2015-1 includes leases on Bentley and Lamborghini vehicles, which comprise approximately 14% of the pool, up from 10% in 2014-1. Limited residual realization data are available for this portion of the portfolio.
Higher Average Vehicle Cost: Industry-level data suggest a correlation between vehicle price and residual loss levels in downturns. The 2015-1 pool contains a substantial percentage of leases on high-priced vehicles such as the 911 Turbo, Bentley and Lamborghini, which could be more exposed to residual volatility in an economic downturn. Fitch accounted for this in the derivation of its residual loss assumption.
Low Historical Loss Levels: Credit losses on PFS' portfolio have been low for the past several years. Residual losses on PFS' portfolio throughout the 2008 to 2009 industry downturn were lower than those of other luxury lease originators, with recent performance showing residual gains.
Sufficient CE Structure: Loss coverage provided in the 2015-1 structure is sufficient to support a five times multiple of Fitch's base case credit loss expectation of 0.85% and 'AAAsf' stressed RV loss assumption of 30.6%.
Evolving Wholesale Market: The U.S. wholesale vehicle market has been normalizing following 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 Origination/Underwriting/Servicing: Fitch believes PFS demonstrates adequate abilities as originator, underwriter, and servicer to service the 2015-1 pool.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of PFS 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 and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to PILOT 2015-1 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 two and less than one rating category even under Fitch's severe (2.5x base case loss). The transaction shows more sensitivity to residual loss volatility, although 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 May 7, 2015. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in Porsche Innovative Lease Owner Trust 2015-1 -- 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 March 2015.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Auto Lease ABS' (April 2015);
--'Global Structured Finance Rating Criteria' (March 2015);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (April 2012).
--'Porsche Innovative Lease Owner Trust 2015-1 -- Appendix' (May 2015).
Applicable Criteria and Related Research: Porsche Innovative Lease Owner Trust 2015-1 (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