Fitch Rates BMW Vehicle Lease Trust 2017-2.
--$175,000,000 class A-1 notes 'F1+sf';
--$230,000,000 class A-2a notes 'AAAsf'; Outlook Stable;
--$150,000,000 class A-2b notes 'AAAsf'; Outlook Stable;
--$350,000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$95,000,000 class A-4 notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Stable Collateral Quality: The 2017-2 pool is consistent with recent transactions, with a strong WA FICO score of 784 and 10 months of seasoning. Cars total 58%, and the 3 Series continues to be the top model at 19%. The residual value (RV) maturity composition is down relative to 2017-1.
Adequate CE Structure: Initial credit enhancement (CE) is composed of a 0.25% reserve fund and initial overcollateralization (OC) of 15.40%, which grows to a 17.55% target of the initial securitization value (SV) before stepping down to 16.55% after the floating rate notes are paid in full. Initial excess spread is expected to be 4.91%. Fitch's credit loss proxy is 0.80% and the 'BB' residual loss proxy is 13.05%. CE is adequate to support Fitch's stressed loss assumptions.
Credit Losses Stable; Residual Performance Declining: Credit losses on BMW FS's portfolio have remained low in recent years. Residual performance has softened over the past year, driven largely by weakness in the car segment and specifically the 3 Series but continues to perform below peak loss levels. Securitizations continue to show strong credit and residual performance.
Evolving Wholesale Market: The U.S. wholesale vehicle market has come off peak levels and values continue to soften following strong performance in post-recessionary years. Fitch expects that increasing off-lease vehicle supply and pressure from increased production levels will lead to decreased residual realizations during the life of the transaction.
Stable Origination/Underwriting/Servicing: BMW FS demonstrates adequate abilities as originator, underwriter and servicer to service this series as evidenced by historical portfolio and securitization delinquency and loss performance.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of BMW FS would not impair the timeliness of payments on the securities.
Unanticipated decreases in the value of returned vehicles and/or increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case and would likely result in declines of CE and loss coverage levels available to the notes. Thus, Fitch conducts sensitivity analyses by increasing the transaction's initial base case RV and credit loss assumptions and examining the rating implications on all classes of issued notes. The increases to the base case losses are applied such that they represent moderate (1.5x) and severe (2.5x) stresses, and are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with third-party due diligence information from KPMG, LLP. The third-party due diligence focused on comparing or recalculating certain information with respect to 100 receivables. Fitch considered this information in its analysis and the findings did not have an impact on our analysis/conclusions. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link at the bottom of the rating action commentary.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
Fitch's analysis of the Representations and Warranties (R&Ws) of this transaction can be found in 'BMW Vehicle Lease Trust 2017-1 -Appendix'. These R&Ws are compared to those of typical R&Ws for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated May 31, 2016.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Jan 3, 2018|
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