Fitch Affirms Silver Arrow S. A. Compartment 5 Class A Notes at 'AAAsf'; Outlook Stable
Silver Arrow S. A. Compartment 5 is a securitisation of auto loan receivables granted to small commercial and private customers and originated by Mercedes-Benz Bank AG (MBB), a wholly owned subsidiary of Daimler AG. As of end-July 2016, the collateral pool consisted of 27,852 loan contracts and the outstanding loan balance (EUR361.1m) was split between new (67.9%) and used (32.1%) vehicle loans. Balloon loans are included in this static transaction and, as of end-July 2016, accounted for 72.2%. This is the fifth securitisation of German loan receivables under the Silver Arrow brand.
KEY RATING DRIVERS
The affirmation reflects the transaction's stable performance to date. As of end-July 2016, the outstanding class A notes accounted for 28.6% of their initial balance. Credit enhancement, provided by overcollateralisation and the reserve fund, has increased to 23.8% from 8% at closing in October 2014.
Cumulative defaults and 30-days plus delinquency ratios have been low since closing and the reserve fund is fully funded at the required amount.
Fitch expects the performance of German consumer ABS transactions to remain stable, based on a steady economic outlook. Fitch forecasts GDP growth of 1.8% for 2016, 1.5% in 2017 and 1.4% in 2018, according to its August portfolio review. The agency projects annual German unemployment rates at 4.3% in 2016 and 2017.
Based on the amortisation to date and the positive performance, Fitch has revised down 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 1.50% from the original 2.25% at closing. Other assumptions remain unchanged.
Expected impact upon the note rating of increased defaults and reduced recoveries (class A):
Current Rating 'AAAsf'
Increase default base case by 25%; reduce recovery base case by 25%: 'AAAsf'
An isolated increase (decrease) of defaults (recoveries) by 25% does not have any expected rating impact.
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 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.
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.
- Loan level data from the European Data Warehouse (Edwin) as at end-July 2016
- Issuer and Servicer reports provided by Mercedes-Benz Bank up to and including the collection period ending 31 July 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.