S&P: Rating Raised On German Auto ABS Transaction RevoCar 2014's Class A Notes Following Review
Today's upgrade follows our full review of the transaction's performance since closing on May 28, 2014 (see "Rating Assigned To German ABS Transaction RevoCar 2014's Class A Notes").
Late stage delinquencies (more than 90 days past due) have been declining since August 2015 and remain low. Realized gross losses also compare favorably with our base-case expectations. As of June 2016, the late stage delinquency rate was 0.22%, while the cumulative gross loss rate since closing was 0.45%. As of the June 2016 investor report, the cumulative recovery rate on losses since closing was 75.2%. The pool has experienced average prepayments, which are closer to our high constant payment rate scenario of 24.0% than to our low scenario of 0.5%.
The pool's weighted-average yield of 4.91% as of June 2016 is unchanged since closing.
The transaction features a combined pre-enforcement priority of payments. Under this, interest on the class A notes is payable after the available distribution amount has first been used to pay senior expenses including servicing fees. After replenishing the general reserve to the required level, any remaining distribution amount can be used to pay down class A principal. Payment of interest and principal on the unrated class B notes follows the replenishment of commingling and setoff reserves, if required.
As a consequence of the notes' amortization, available credit enhancement for the class A notes has increased to 53.4% from 17.9% at closing. The pool factor in June 2016 was 39.0%, while the class A note factor was about 21.0%.
Operational, counterparty, legal, payment structure, and cash flow risks continue to be adequately mitigated, in our view, and do not constrain the rating on the notes.
Our analysis indicates that the available credit enhancement for the class A notes is sufficient to withstand the credit and cash flow stresses that we apply at a higher rating than that currently assigned. Additionally, the application of our ratings above the sovereign criteria does not constrain the rating on the notes (see "Ratings Above The Sovereign--Structured Finance: Methodology And Assumptions," published on May 29, 2015). We have therefore raised to 'AAA (sf)' from 'AA - (sf)' our rating on the class A notes.
These ratings are based on our currently effective criteria. However, our recent update to these criteria, which become effective on Aug. 29, 2016, may affect these ratings (see "Structured Finance Criteria For Rating Above The Sovereign Published," published on Aug. 9, 2016).
RevoCar 2014's portfolio comprises fixed-rate straight amortizing loan receivables with a small portion (approximately 36% as of June 2016) of fixed-rate balloon loan receivables. The loans were originated by Bank11 fur Privatkunden und Handel GmbH to private individuals or sole proprietors to finance passenger vehicle purchases.