Fitch to Rate Volkswagen Auto Lease Trust 2015-A; Issues Presale
--Class A-1 asset-backed notes 'F1+sf';
--Class A-2a asset-backed notes 'AAAsf'; Outlook Stable;
--Class A-2b asset-backed notes 'AAAsf'; Outlook Stable;
--Class A-3 asset-backed notes 'AAAsf'; Outlook Stable;
--Class A-4 asset-backed notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Stable Collateral Quality: The pool is consistent with that of 2014-A, with a strong WA FICO score of 759, 11 months of seasoning and undiscounted residual value representing 67.10% of the securitization value.
Adequate CE Structure: Initial CE is consistent with 2014-A and will be 15.75% growing to a target of 17.25% of the initial securitization value (until Class A-2 has been paid in full, at which point the target overcollateralization drops by 1%). Initial excess spread is expected to be 5.16%, down from 5.35% in 2014-A. Loss coverage is adequate to support Fitch's 'AAAsf'-stressed assumptions.
Strong Loss Performance: Credit and residual performance on VCI's portfolio has been strong in recent years. This is a result of robust obligor credit quality and a strong wholesale used vehicle market, leading to elevated recovery rates and residual realizations.
Evolving Wholesale Market: The U.S. wholesale vehicle market is expected to normalize following strong performance in recent years. Fitch expects increasing used vehicle supply from off-lease vehicles and trade-ins to pressure ABS recovery rates leading to moderately higher loss rates. Fitch's analysis accounts for this risk by including periods of weak wholesale vehicle market performance in the derivation of residual and credit loss expectations.
Stable Origination/Underwriting/Servicing: Fitch believes VCI to be a capable originator, underwriter, and servicer, as evidenced by historical portfolio delinquency and loss experience and securitization performance. Fitch believes VCI is capable of adequately servicing 2015-A.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of VCI would not impair the timeliness of payments on the securities.
Unanticipated decreases in the value of returned vehicles and/or increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn would likely result in declines of credit enhancement and loss coverage levels available to the notes. Hence, Fitch conducts sensitivity analyses by increasing the transaction's initial base case RV and credit loss assumptions and examining the rating implications on all classes of issued notes. The increases to the base case losses are applied such that they represent moderate (1.5x) and severe (2.5x) stresses, respectively. They are also intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.
The presale report is available at 'www.fitchratings.com' or by clicking on the above link.