CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks to the notes issued by Capital Auto Receivables Asset Trust 2015-2:
--$205,000,000 class A-1a 'AAAsf'; Outlook Stable;
--$205,000,000 class A-1b 'AAAsf'; Outlook Stable;
--$290,000,000 class A-2 'AAAsf'; Outlook Stable;
--$290,000,000 class A-3 'AAAsf'; Outlook Stable;
--$95,400,000 class A-4 'AAAsf'; Outlook Stable;
--$63,650,000 class B 'AAsf'; Outlook Stable;
--$60,300,000 class C 'Asf'; Outlook Stable;
--$53,600,000 class D 'BBBsf'; Outlook Stable;
--$67,000,000 class E 'BB-sf'; Outlook Stable.
KEY RATING DRIVERS
Stable Collateral Characteristics: The 2015-2 pool is representative of nonprime collateral, with a 633 weighted average (WA) Fair Isaac Corp. (FICO) score, 8.76% WA annual percentage rate (APR) and 104% WA loan-to-value (LTV) ratio. Of the pool, 60% consists of new vehicle contracts, while extended-term contracts total 77%, all relatively consistent with recent securitized 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 eligibility criteria pertaining to the additional receivables may mitigate some of this risk. Fitch accounts for collateral migration in its derivation of the base case loss proxy for 2015-2.
Adequate Credit Enhancement: Initial hard credit enhancement (CE) for class A notes totals 19.50%. The non-declining reserve is 0.50%, subordination totals 18.25% and initial overcollateralization (OC) is 0.75%, growing to a target of 2.25% after the revolving period.
Stable Portfolio Performance: AFIN's nonprime auto loan portfolio has shown improved performance relative to the weak 2006-2008 period, given the gradual improvements in the U.S. economy and healthy used vehicle values. Fitch's base case loss proxy for 2015-2 is 5.60%; however, Fitch's ABS extrapolation based on outstanding CARAT transactions out of the revolving period is below 3.00%.
Stable Corporate Health: Fitch currently rates AFIN 'BB+/B'/Outlook Stable. AFIN demonstrates solid capabilities as an originator, underwriter and servicer, as evidenced by its historical prime and nonprime 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.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. In turn, it could result in potentially adverse rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of Capital Auto Receivables Asset Trust 2015-2 to increased losses over the life of the transaction. Fitch's analysis found that the notes display some sensitivity to increased defaults and losses. In fact, they could lead to potential downgrades of up to one category under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of two to three rating categories under Fitch's severe (2.5x base case loss) scenario.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated May 8, 2015. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Capital Auto Receivables Asset Trust 2015-2 - Appendix'. These R&Ws 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.
Key Rating Drivers and Rating Sensitivities are further described in Fitch's presale report, available at 'www.fitchratings.com'.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (March 2015);
--'Criteria for Rating U.S. Auto Loan ABS' (April 2015);
--'Structured Finance Tranche Thickness Metrics' (July 2011).
--'Capital Auto Receivables Asset Trust 2015-2 Appendix' (May 2015).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Rating Criteria for US Auto Loan ABS
Structured Finance Tranche Thickness Metrics
Capital Auto Receivables Asset Trust 2015-2 -- Appendix