NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the RenewFund Receivables Trust 2015-1 class A notes at 'Asf'. The Rating Outlook remains Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of loans primarily originated by AFC First Financial Corporation through The WHEEL and Keystone Help programs, the latter of which is sponsored by the Pennsylvania State Treasury. The underlying collateral are five- or 10-year term low-rate loans to help make affordable energy efficiency home improvements. The original weighted average FICO of the pool is 749 with an original average loan balance of $7,554. Fitch's original base case default assumption was 5.13%, and defaults to date have totalled 0.62% of the original pool balance as of the April 2016 collection period. The trust continues to perform within Fitch's expectations.
Sufficient Credit Enhancement (CE): CE supporting the notes is provided by overcollateralization (OC) and excess spread provided by a Yield Supplement Account (YSA). The current OC amount (principal receivables less note balance) is 26.21% as of the April 2016 collection period, up from 20.3% at closing.
Adequate Liquidity Support: Liquidity support is provided by the Reserve Fund and YSA. The Reserve Fund was funded at closing to $157,884 and has maintained this level, equal to 1% of the initial pool balance. The YSA was funded at closing to $2,411,370, and on each distribution date, cash will be drawn from the YSA and added to the collection fund in an amount that would increase the yield of the loans from their contractual rate to 8.50%. No additional cash will be deposited to the YSA after closing. As of the April 2016 collection period, the balance of the YSA was $1,680,842.
Acceptable Servicing Capabilities: RenewFund Finance LLC acts as Master Servicer to the loans, with Renew Financial Corp. II acting as day-to-day servicer. Wells Fargo Bank, NA is the Backup Servicer for the trust and would step in to perform the duties of RenewFund Finance LLC or Renew Financial Corp. II should either be terminated as Master Servicer or Servicer, respectively.
Unanticipated increases in the frequency of defaults or charge-offs on customer accounts could produce loss levels higher than the base case and would likely result in declines of CE and remaining loss coverage levels available to the investments. Decreased CE may make certain ratings on the investments susceptible to potential negative rating actions, depending on the extent of the decline in coverage. In the initial review, Fitch conducted sensitivity analysis by stressing the transaction's initial base case charge-off assumption by 1.5x, 2.0x, and 2.5x and examining the rating implications. The 1.5x, 2.0x, and 2.5x increase of the base case charge-offs are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration of a transaction's performance.
During the sensitivity analysis, Fitch examined the magnitude of the multiplier compression by projecting the expected cash flows and loss coverage levels over the life of investments under higher than the initial base case charge-off assumptions. Fitch modelled cash flows with the revised charge-off estimates while holding constant all other modelling assumptions.
Under the 1.5x base case stress scenario, the multiple for the investments compressed from the initial level to 1.95x-2.05x, corresponding to a one-category downgrade. Under the 2.0x base case stress scenario, the multiple for the investments compressed from the initial level to 1.45x-2.05x, corresponding to a two-category downgrade. Under the 2.5x base case stress scenario, the multiple for the investments compressed from the initial level to 1.15x-1.25x, corresponding to a two-category downgrade.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following rating:
RenewFund Receivables Trust 2015-1:
--3.51% class A asset backed notes at 'Asf', Outlook Stable.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)
Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)
Global Consumer ABS Rating Criteria (pub. 03 Dec 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Dodd-Frank Rating Information Disclosure Form