Fitch Upgrades E-Carat 2 Plc Class B Notes to 'AAAsf'; Outlook Stable
E-CARAT 2 UK plc is a securitisation of auto loan receivables originated by GMAC UK plc, which is also the servicer. The securitised portfolio consists of secured, fixed-rate loans advanced to UK residents. As of end-July 2016, the collateral pool consisted of 20,412 auto loan receivables and the transaction balance is split into new (81.5%) and used (18.5%) vehicle loans. No balloon loans are included in this static transaction.
KEY RATING DRIVERS
Today's rating actions reflect the transaction's healthy performance to date. As of end-June 2016, the outstanding class A notes accounted for 9.2% of their initial balance. Credit enhancement, provided by overcollateralisation and a reserve fund, has increased to 57.4% from 12.4% for the class A notes and to 28.1% from 6.9% for the class B notes.
Cumulative defaults and 30-days plus delinquency ratios have been low since closing in October 2013. The reserve fund is fully funded at the required amount.
Fitch expects the performance of UK consumer ABS transactions to remain stable, underpinned by a steady economic outlook. Fitch forecasts GDP growth of 1.7% for 2016, and 0.9% in 2017, based on the July Global Economic Outlook Report.
Based on the amortisation to date and the positive performance, Fitch has made a downward revision to its lifetime default base case assumption for the transaction. The lifetime default base case assumption for the original balance of the transaction has been lowered to 1.05% from 2% at closing. Other assumptions remain unchanged.
Expected impact upon the notes' ratings of increased defaults (class A/B):
Current Rating: 'AAAsf' / 'AAAsf'
Increase base case defaults by 25%: 'AAAsf'/ 'AAAsf'
Expected impact upon the notes' ratings of decreased recoveries (class A/B):
Current Rating: 'AAAsf' / 'AAAsf'
Reduce base case recovery by 25%: 'AAAsf' / 'AAAsf'
Expected impact upon the notes' ratings of increased defaults and reduced recoveries (class A/ B):
Current Rating 'AAAsf' / 'AAAsf'
Increase default base case by 25%; reduce recovery base case by 25%: 'AAAsf' / 'AAAsf'
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
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 affected the rating 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 and concluded that there were no findings that affected the rating analysis.
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 reports provided by GMAC UK, up to 31 July 2016
- Updated loan-by-loan file provided by GMAC UK with cut-off date 30 June 2016
The Fitch Granular Asset Loss Analyser (GALA Model) was used in the analysis. Click on the link for a description of the model.
Https://www. fitchratings. com/site/structuredfinance/abs/gala
REPRESENTATIONS AND WARRANTIES
A description of the transaction's representations, warranties and enforcement mechanisms ("RW&Es") that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016.