OREANDA-NEWS. Fitch Ratings has upgraded abc SME lease Germany SA Compartment 2 class B and C notes and affirmed the class A notes as follows:

EUR212.6m class A notes: affirmed at 'AAAsf'; Stable Outlook

EUR30.8m class B notes: upgraded to 'AAAsf' from 'AAsf'; Stable Outlook

EUR29.3m class C notes: upgraded to 'AAsf' from 'Asf'; Stable Outlook

EUR60.2m Class D notes: not rated

The transaction is a securitisation of lease contracts granted to German small - and medium-sized enterprises (SMEs), originated by abcfinance GmbH and milon financial services GmbH. Both originators are part of the Werhahn Group. The wide range of leased assets can be divided into five groups: vehicles; machines; facilities; solar, fitness and leisure; and other. The transaction is static and the notes amortise sequentially. Only the amortising portion of the lease receivables is securitised. Both assets and rated notes pay fixed interest.

KEY RATING DRIVERS

The rating actions reflect the portfolio's stable performance since issuance and the increase in credit enhancement as a result of rapid portfolio amortisation. As of the July 2016 reporting date, the portfolio had amortised to EUR333.2m from the original amount EUR503.0m. The class A notes amortised down to EUR212.6m as of end-June 2016 from the original amount of EUR382.7m. CE for the class A notes has increased to 36.5% from 24.1%; for the class B notes to 27.2% from 18.9% and for the class C notes to 18.5% from 12.2%.

The portfolio's composition has remained largely unchanged. The portfolio granularity remains almost unchanged from closing with the largest lessee group accounting for 0.68% compared with 0.55% at closing. The largest 40 lessee groups currently account for 9.0% compared with 8.1% at closing. The transaction benefits from an appointed back-up servicer (akf Bank GmbH & Co. KG), which together with the available liquidity reserve, adequately addresses the servicer discontinuity risk.

Arrears of more than 30 days past due make up 0.2 % of the current pool balance. Longer arrears are also low, with 60+ days arrears at 0.2%, 90+ days arrears at 0.1% and 180+ days arrears at 0.01% of the current pool balance. In Fitch's view, the arrears profile is rather volatile, due to the commercial nature of the portfolio.

Both reported defaults (0.6%) and recoveries (21.9% of total defaults) are broadly in line with Fitch's expectations to date. However, the transaction has shown only few defaults to date given the relatively long default definition (210 days past due). Due to limited available performance data (defaults and recoveries) to date, Fitch has maintained its original base case default assumption of 5.0% and its original base case recovery assumption of 60.1%.

The stable economic outlook in Germany supports the transaction's performance. The amount of corporate and non-corporate insolvencies has been decreasing recently, in line with the solid development of the German economy.

RATING SENSITIVITIES

Expected impact upon the note rating of increased defaults and decreased recoveries (class A/B/C):

Current Ratings: 'AAAsf'/'AAAsf'/'AAsf'

Increase default base case by 10%; reduce recovery base case by 10%: 'AAAsf'/'AAAsf'/'AA-sf'

Increase default base case by 25%; reduce recovery base case by 25%: 'AAAsf'/'AA+sf'/'Asf'

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

-Monthly Investor Report cut-off date 30 June 2016 provided by abcbank GmbH

-Loan Level Data cut-off date 30 June 2016 downloaded from European Data Warehouse (Edwin)