Correction: Fitch Assigns Final Ratings to Chrysler Capital Auto Receivables Trust 2016-A
OREANDA-NEWS. This release amends the criteria listed for the release published April 19, 2016 to add 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 2014).
Fitch Ratings has assigned the following ratings to Chrysler Capital Auto Receivables Trust 2016-A:
--$180,000,000 class A-1 notes 'F1+sf'; Outlook Stable;
--$279,030,000 classes A-2 notes 'AAAsf'; Outlook Stable;
--$279,030,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$81,450,000 class A-4 notes 'AAAsf'; Outlook Stable;
--$33,190,000 class B notes 'AAsf'; Outlook Stable;
--$51,060,000 class C notes 'Asf'; Outlook Stable;
--$40,850,000 class D notes 'BBBsf'; Outlook Stable.
KEY RATING DRIVERS
Limited Performance History; Proxy Data Utilized: Chrysler Capital (CC) was founded in 2013 and has limited history and performance data, and thus Fitch did not utilize this data. For the 88.5% CC receivables, Fitch used conservative 2006-2008 vintage peer securitization data to extrapolate and derive a loss proxy for this portion in 2016-A.
Stable CC/SC Receivables Mix: CC originations total 88.5% of 2016-1, in line with the prior three pools, while Santander Consumer USA Inc (SC) nonprime originations total 11.5%, fairly stable versus prior pools going back to 2014-B (the first pool to include SC originations). As 2016-A includes prime and nonprime collateral, Fitch used conservative nonprime SC loss data when deriving a loss proxy for the SC portion of receivables in 2016-A.
Consistent Collateral Pool: The 2016-A collateral is fairly consistent with prior pools. The WA FICO score is 707, WA APR is 7.86%, WA LTV is 106.67% and new vehicles total 71.6%. Commercial contracts (with co-obligor FICO scores) total 13%, the highest to date. The collateral characteristics in 2016-A indicate elements of prime and nonprime consumer credits.
High Percentage of Extended-Term Loans: Loans with terms of 60-plus months total 80.7%, including 20.1% with terms of 73-75 months. This level is improved over prior pools, which had 82.1%-88% loans greater than 60 months. Fitch applied a stress to the loss proxy to account for the risk posed by the greater than 72-month loans due to the limited performance history.
Performance Weakening: The SC and CC portfolios along with the CCART securitizations have recorded rising delinquencies and cumulative net losses (CNL) year over year (YOY) through 2015. Although the portfolio and securitizations have prime borrower elements, Fitch classifies 2016-A as a prime and nonprime pool based on the historical ABS loss performance to date and applied nonprime loss multiples during its analysis.
Sufficient Credit Enhancement (CE): Initial hard CE totals 20% for the class A notes, up from 18% in 2015-B (not rated by Fitch). CE for the class B-D notes is also higher versus the prior transactions. Excess spread is 4.66%, the lowest level to date going back to 2013-A (not rated). CE is sufficient to cover Fitch's 5.20% base case proxy and modeled net loss levels for all the notes.
Stable Corporate Health: SC has been profitable for the majority of its existence, including in recent years. Fitch rates Santander, majority owner of SC, 'A-'/'F2'/Stable Outlook. A backup servicer must be appointed if Santander's rating falls below 'BBB-' or if Santander ceases to own 50% or more of the common stock of SC.
Consistent Origination/Underwriting/Servicing: Along with its CC division, SC demonstrates adequate abilities as originator, underwriter and servicer, as evidenced by historical portfolio and securitization performance. Fitch deems SC capable to service this series.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of SC would not impair the timeliness of payments on the securities.
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 Capital Auto Receivables Asset Trust 2016-1 to increased credit losses over the life of the transaction. The analysis found that the transaction displays some sensitivity to increased defaults and credit losses. Fitch saw a potential downgrade of one category under its moderate (1.5x base case loss) scenario, especially for the subordinate bonds. The notes could experience downgrades of up to two rating categories, potentially leading to distressed ratings, under Fitch's severe (2x base case loss) scenario.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence focused on comparing or recomputing certain information with respect to 145 receivables from the statistical data file. Fitch considered this information in its analysis, and the findings did not have an impact on the analysis. 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 related rating action commentary.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled 'Chrysler Capital Auto Receivables Asset Trust 2016-A -- Appendix'. These R&W 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 2, 2016.