Fitch Rates Nissan Auto Lease Trust 2016-A
OREANDA-NEWS. Fitch Ratings has assigned the following ratings and Outlooks to the Nissan Auto Lease Trust 2016-A (NALT 2016-A) notes:
--Class A-1 notes 'F1+sf';
--Class A-2a/A-2b notes 'AAAsf'; Outlook Stable;
--Class A-3 notes 'AAAsf'; Outlook Stable;
--Class A-4 notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Stable Collateral Quality: The (WA) FICO score of 753 is consistent with prior NALT pools. The pool is primarily composed of 36-month leases, has seasoning of 11 months, and the base residual value percentage has increased to 70.48% from 70.03% for NALT 2015-B.
Adequate Credit Enhancement Structure: Initial credit enhancement (CE) is expected to be 16.50% of the initial securitization value (SV), growing to 17.50% of the initial SV. Excess spread is expected to be 4.64%.
Stable Credit Loss: Credit losses on NMAC's portfolio and recent NALT securitizations have stabilized since the weak 2008-2009 period. This trend has been supported by the improved obligor credit quality and higher recovery rates in recent securitizations. Fitch's credit loss proxy for 2016-A is 0.90%.
Weaker Residual Performance: Residual loss performance for the NMAC platform has softened through 1Q2016. Infiniti vehicles, in particular, have played a larger role in driving losses. However, losses are still well below peak 2008-2009 levels for both the Nissan and Infiniti brands. Fitch's 'BB' RV loss expectation is 12.30% of base residual.
Evolving Wholesale Market: The U.S. wholesale vehicle market has been normalizing following strong performance in recent 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.
Consistent Origination/Underwriting/Servicing: NMAC has adequate capabilities as originator, underwriter, and servicer, as evidenced by historical delinquency and loss performance of its managed portfolio and securitizations. Fitch deems NMAC capable of adequately servicing 2016-A.
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. Hence, 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.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to 125 sample leases. Fitch considered this information in its analysis and the findings did not have an impact on 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.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated May 11, 2016. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Nissan Auto Lease Trust 2016-A -Appendix'. These R&Ws are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated March 2016.