Fitch Rates Wheels SPV 2, LLC, Series 2016-1

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings to Wheels SPV 2, LLC, Series 2016-1 (Wheels 2016-1) notes:

--$131,000,000 class A-1 notes 'F1+sf';

--$275,000,000 class A-2 notes 'AAAsf'; Outlook Stable;

--$70,100,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$21,200,000 class A-4 notes 'AAAsf'; Outlook Stable;

--$7,700,000 class B notes 'NR';

--$7,600,000 class C notes 'NR'.

KEY RATING DRIVERS

Strong Credit Quality Obligors: Approximately 72% of the portfolio is rated by Fitch or another nationally recognized statistical rating organization (NRSRO). In its analysis, Fitch assumed a 'B' rating for unrated obligors. Additionally, about 64% of the pool is rated investment grade. Fitch's net loss expectation for this pool is 6.80%.

Consistent Concentrations: Both obligor and industry concentrations remain stable. The top 20 obligors by balance represent 50%, consistent with prior transactions. Top five industries comprise 44% of the pool, similar to prior levels. Light-duty trucks comprise 73% of the pool.

Low Delinquency and Loss History: Wheels' historical managed portfolio and prior transaction delinquency and loss experience is low, even during periods marked by elevated levels in other consumer and commercial asset classes.

Minimal Residual Risk: The 2016-1 leases are all open-ended, meaning lessees bear residual risk. Therefore, the trust is only exposed to wholesale market risk in the event of an obligor default. Even then, vehicle dispositions have largely resulted in gains relative to book value due to depreciation policies and substantial vehicle discounts obtained by Wheels.

Sufficient Credit Enhancement: Credit enhancement (CE) has decreased to 7.15% compared to about 8% for the last three transactions. While total CE has decreased it is sufficient to support loss levels consistent with expected ratings of 'AAAsf'.

Quality Origination, Underwriting and Servicing Platform: Wheels has an investment-grade rating of 'A/F1' by Fitch and has demonstrated strong abilities as originator, underwriter, and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults could produce default levels higher than the projected base case default proxy and impact available default coverage and multiples levels. Lower default coverage could impact ratings and Rating Outlooks, depending on the extent of the decline in coverage. In Fitch's initial review of the transaction, the notes were found to have limited sensitivity to changes in obligor credit profiles and recovery rates associated with the concentration of oil and gas collateral in the pool. Further details can be found in the presale report.

Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the above link.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Fitch was provided with Form ABS Due Diligence-15E ("Form 15E") as prepared by Ernst & Young. The third-party due diligence described in Form 15E focused on comparing or recalculating certain information with respect to 150 leases. Fitch considered this information in its analysis and it did not have an effect on Fitch's analysis or conclusions.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms ("RW&Es") that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879815

Criteria for Rating U.S. Auto Lease ABS (pub. 24 Mar 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879019

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Global Rating Criteria for CLOs and Corporate CDOs (pub. 28 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885653

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Related Research

Wheels SPV 2, LLC, Series 2016-1 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885725

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010217

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1010217&flm_nm=15e_1010217_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010217

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160810006159/en/

Fitch Ratings
Primary Analyst
Thomas Kaiser, CPA, CFA
Associate Director
+1-312-368-3338
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst
Yun Tian
Associate Director
+1-212-908-0307
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0214
or
Media Relations
Sandro Scenga
+1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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