Fitch Rates CitiFinancial Canada Issuance Trust Series 2015-1 August 2016
--Series 2015-1 August 2016 notes 'Asf'; Outlook Stable.
KEY RATING DRIVERS
Fitch's rating is based on the underlying receivables pool, available credit enhancement (CE), CitiFinancial Canada, Inc.'s underwriting and servicing capabilities, and the transaction's legal and cash flow structures.
Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated July 18, 2016, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness. The definition of permitted investments for this deal allows for the possibility of using investments not rated by Fitch, which represents a criteria variation. Since the only available funds to invest in are those held in the Collection Account, and the funds can only be invested for a short duration of one month given the payment frequency of the notes, Fitch does not believe this variation has a measurable impact on the ratings assigned.
Unanticipated increases in the frequency of defaults or charge-offs on the loans in the pool could produce loss levels higher than the base case and would likely result in declines of CE and remaining loss coverage levels available to the notes. Decreased CE may make certain ratings on the notes susceptible to potential negative rating actions, depending on the extent of the decline in coverage. Therefore, Fitch conducts sensitivity analysis by stressing a transaction's initial base case charge-off assumption by 1.5x and 2.5x and examining the rating implications. The 1.5x and 2.5x increase of the base-case account charge-offs represent moderate and severe stresses, respectively, and are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration of a trust's performance.
During the sensitivity analysis, Fitch examines the magnitude of the multiplier compression by projecting the expected cash flows and loss coverage levels over the life of the notes under higher than the initial base case charge-off assumptions. Fitch models cash flows with the revised charge-off estimates while holding constant all other modelling assumptions.
Under the 1.5x base case stress scenario, the minimum breakeven multiple decreases to approximately 1.97x, corresponding to a one-category downgrade to 'BBBsf'. Under the 2.5x base-case stress scenario, the minimum breakeven multiple decreases to approximately 1.23x, corresponding to a three-category downgrade to 'Bsf'.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
The publication of a RW&Es appendix is not required for this transaction.
The CitiFinancial Canada Issuance Trust series 2015-1 July 2016 notes are paid in full.