Fitch Rates World Omni Auto Receivables Trust 2016-A

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings and Rating Outlooks to the notes issued by World Omni Auto Receivables Trust 2016-A (WOART 2016-A):

--$152,000,000 class A-1 notes 'F1+sf';

--$352,000,000 class A-2 notes 'AAAsf'; Outlook Stable;

--$262,000,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$74,800,000 class A-4 notes 'AAAsf'; Outlook Stable;

--$18,030,000 class B notes 'AAsf'; Outlook Stable.

KEY RATING DRIVERS

Weaker Credit Quality: The 2016-A pool has weaker collateral credit quality compared with recent transactions. The WA FICO score has decreased to 722, the lowest level since 2008-B. New vehicles total 94.5% and the pool is geographically concentrated in the southeast, consistent with historical World Omni originations.

High Percentage of Extended-Term Loans: Loans with original terms greater than 60 months total 80.3% in 2016-A, the highest to date. Extended-term loans have historically produced higher loss rates. Mitigating this somewhat is that borrowers within this segment have strong obligor FICO scores. Fitch accounted for this risk in its determination of the loss proxy.

Adequate Credit Enhancement (CE) Structure: CE in 2016-A is consistent with prior transactions, with 4.55% hard CE for the class A notes, 2.50% hard CE for the class B notes, and 3.56% of annual excess spread (up from 3.53% in 2015-B). The structure is able to support the respective multiples of Fitch's base case loss expectation of 2.25%, commensurate with the final ratings.

Evolving Wholesale Market: The U.S. wholesale vehicle market is normalizing following strong performance in recent years. Fitch expects increasing used vehicle supply from off-lease vehicles and trade-ins to pressure ABS recovery rates, leading to moderately higher loss rates.

Stable Portfolio/Securitization Performance: World Omni's portfolio and securitizations have experienced increases in delinquency and net loss performance in the 2013-2015 vintages, although they remain below peak levels.

Consistent Origination/Underwriting/Servicing: Fitch believes World Omni to be a capable originator, underwriter, and servicer for 2016-A as evidenced by the historical performance of its managed portfolio and securitizations.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of World Omni would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn could result in Fitch taking negative rating actions on the notes.

Fitch evaluated the sensitivity of the ratings assigned to World Omni Auto Receivables Trust 2016-A to increased credit losses over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and credit losses. The sensitivity analysis shows a potential downgrade of one category for both classes of notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to three rating categories under Fitch's severe (2.5x base case loss) scenario.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from Ernst & Young LLP (EY). The third-party due diligence focused on an extract of 131 retail instalment sale contracts that were selected by EY and verified for details such as customer name and state, interest rate, monthly payment amount, original term, FICO, etc. In that sample set all compared information was in agreement. Fitch considered this information in its analysis and concluded that the findings do not impact our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary (RAC).

Fitch's analysis of the Representation and Warranties (R&W) of this transaction can be found in: 'World Omni Auto Receivables Trust, Series 2016-A Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in Fitch's March 3, 2016 special report: --'Representations, Warranties, and Enforcement Mechanisms in the Global Structured Finance Transactions'.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

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 Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for U.S. Auto Loan ABS (pub. 21 Mar 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878723

Related Research

World Omni Auto Receivables Trust 2016-A -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878772

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001371

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1001371&flm_nm=15e_1001371_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001371

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/20160323006040/en/

Fitch Ratings
Primary Analyst
Joyce Fargas
Director
+1-212-908-0824
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
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, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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