OREANDA-NEWS. Fitch Ratings has assigned Cars Alliance Auto Loans Italy 2015's fixed-rate notes a final rating as follows:

EUR955m class A notes, due in December 2031: 'AA+sf'; Outlook Stable
EUR291.5m class J notes, due in December 2031: not rated

The transaction is backed by performing auto loan receivables originated to Italian individuals and companies by RCI Italy (RCI), the fully owned Italian branch of RCI Banque S.A., a 100% subsidiary of France-based Renault SA (BBB-/Stable).

KEY RATING DRIVERS
Better than Average Asset Performance
Fitch determined a weighted average (WA) default base case of 2.4% and a WA recovery base case of 22.2%. These base cases are at the low end of European auto loan transactions. Fitch has applied a high stress multiple of six times on defaults to account for a potential Italian economic deterioration during the 30-month revolving period.

Insurance-Related Risk
The securitised loans also finance the insurance premiums of certain policies sold together with the vehicle. Should the insurance policies be considered linked contracts, the transaction could be exposed to certain claims by borrowers if both an insurance company and RCI default. This risk is magnified since the top insurer belongs to the RCI group and default risk is highly correlated with the originator.

Limits to Pool Deterioration
In its rating analysis, Fitch derived default assumptions considering the possible evolution of the portfolio during the 30-month revolving period. Fitch believes that although the flexibility allowed by the eligibility criteria allows some degree of deterioration of the creditworthiness of the pool, it will not dramatically alter the pool quality over time.

Liquidity and Commingling Mitigated
The servicer RCI is not rated and no back-up servicer is in place at closing. Liquidity disruption is mitigated by a dedicated reserve fund whereas the commingling exposure is covered by credit enhancement.

Residual Value Risk
During the revolving period, 10% of the portfolio may consist of balloon loans exposed to about 65% of residual value risk. Fitch has given limited credit to vehicles' residual value as there is no legal certainty that the issuer can enforce the sale of the vehicle following the insolvency of the seller.

RATING SENSITIVITIES
The following are the model-implied sensitivities from a change in selected input variables:
Stress on default rates:
- Increase in default rates by 10%: downgrade to 'AA+sf'
- Increase in default rates by 25%: downgrade to 'AAsf'

Stress on recovery rates:
- Decrease in recovery rates by up to 25%: downgrade to 'AA+sf'

Combined stress
- Decrease in recovery rates by 10% and increase in default rates by 10%: downgrade to 'AA+'
- Decrease in recovery rates by 25% and increase in default rates by 25%: downgrade to 'AA-sf'

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Fitch conducted a review of a small targeted sample of the originator's loan files and found the information contained in the reviewed files to be 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 asset pool 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-by-loan data provided by RCI as at 10 July 2015
- Historical data provided by RCI as at 31 December 2014
- Loan enforcement details provided by RCI as at 31 December 2014
- Insurance exposure data provided by RCI as at 10 July 2015