Fitch Publishes Updated U.S. Auto Lease ABS Rating Criteria

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings today published an updated asset-backed sector specific criteria report. There have been no material changes from the previous version, and therefore Fitch expects no impact on outstanding ratings.

This report updates and replaces the prior criteria report 'Criteria for Rating U.S. Auto Lease ABS, dated April 24, 2014.

The report presents Fitch's analytical approach to rating U.S. Auto Lease ABS and outlines the unique features of these transactions. Additionally, the report details key rating drivers associated with U.S. auto lease ABS as detailed below.

KEY RATING DRIVERS

Lease-End Residual Risk: Fitch's analysis of auto lease securitizations places a large focus on RV risk (see page 7 of the report). Fitch's RV risk analysis is driven by the issuer's historical RV loss rates and the potential volatility of the future used vehicle market. Historical worst case 12 - 18 month observations set the 'BBsf' rating level, with increased residual realization stresses given to investment-grade ratings, as described in the report.

Lessee Credit Risk: Fitch analyzes static pool data, including delinquencies, defaults, net losses, recoveries, the associated timing of these defaults and losses and prepayments. Both industry and originator data are assessed, with greater weight afforded to originator-specific data, which are often more detailed and viewed as a more accurate representation of risk in a portfolio. Base case losses are stressed increasingly for higher ratings, according to the multiples described in the report. Credit risk analysis of auto leases is largely the same as the approach for auto loan ABS.

Concentration Risks: Auto lease pools and, notably, residual loss performance can be impacted by concentrations in the underlying leases or vehicles. Concentrations in vehicle model or segment can expose the trust to idiosyncratic risks affecting specific vehicle types. Additionally, material concentrations in the timing of lease maturities can expose the ABS performance disproportionately to periods of elevated residual losses. Fitch's quantitative analysis explicitly accounts for concentration risks as described in this report.

Counterparty Risk: This portion of the analysis is largely qualitative and includes a review of seller/servicer operations (originations, underwriting and servicing). Findings of the originator, seller and servicer reviews may result in quantitative adjustments to the base and stress case credit and RV loss assumptions. Fitch's assessment of counterparty-related risks is addressed in its 'Counterparty Criteria for Structured Finance and Covered Bonds' report, dated May 2014, and further described in this report.

Macroeconomic Risks: The economic environment can have a material impact on asset performance and auto lease ratings. Fitch takes into consideration the strength of the economy, as well as future expectations, by assessing key macroeconomic indicators that are correlated with lease performance (for example, unemployment).

Additional information is available at 'www.fitchratings.com

Applicable Criteria and Related Research: Criteria for Rating U.S. Auto Lease ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864500

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Bradley Sohl
Senior Director
+1 212-908-0792
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
John Bella, Jr.
Managing Director
+1 212-908-0243
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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