Fitch Affirms Kubota Credit Owner Trust 2014-1
--Class A-2 affirmed at 'AAAsf'; Outlook Stable;
--Class A-3 affirmed at 'AAAsf'; Outlook Stable;
--Class A-4 affirmed at 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
The affirmation of the class A notes reflects loss coverage levels consistent with the 'AAAsf' rating. The Stable Outlook reflects Fitch's expectation for loss coverage and credit enhancement to continue to improve as the transaction amortizes. As of the March 2015 reporting period, cumulative net losses totaled 11 bps for 2014-1. Loss performance is forecasting below Fitch's initial base case loss proxy.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults and loss severity could produce loss levels higher than the current projected base case loss proxy which would impact available loss coverage. Lower loss coverage could impact ratings and Rating Outlooks, depending on the extent of the decline in coverage. In Fitch's initial review of the transaction, the notes were found to have limited sensitivity to 1.5x and 2.5x higher of Fitch's base case loss expectation. Initial key rating drivers and rating sensitivities are further described in the presale reports dated April 14, 2014.
To date, the transaction has exhibited strong performance with losses within Fitch's initial expectations, resulting in rising loss coverage and multiple levels. As such, continued strong performance would most likely result in further stable ratings. Conversely, a material deterioration in performance would have to occur within the asset pools to have potential negative impact on the outstanding ratings.
Fitch's analysis of the Representations and Warranties (R&W) for the 2014-1 transaction can be found in 'Kubota Credit Owner Trust 2014-1 - Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated March 26, 2015.
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