Fitch Expects to Rate BMW Vehicle Lease Trust 2015-2; Presale Issued
--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 2015-1. Securitized residuals comprise 71.68% of the pool and the 3 Series remains the top model at 22.8% of the pool. Seasoning is consistent at 10 months and the weighted average (WA) FICO score has increased to 776.
Adequate Credit Enhancement (CE) Structure: Initial CE has decrease by 0.10% from 2015-1 and will be 17.05%. CE is composed of a 0.25% reserve account and overcollateralization (OC) of 16.80% growing to a target of 18.95% of the initial securitization value (until class A-2 has been paid in full, then the target OC drops to 17.95%). Initial excess spread is expected to be 4.79%.
Strong Loss Performance: Credit and residuals performance on BMW FS'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 higher recovery rates and residuals realizations.
Evolving Wholesale Market: The U.S. wholesale vehicle market has been normalizing following strong performance in recent years. Fitch expects that increasing off-lease vehicle supply and pressure from increased production levels will lead to decreased residual realizations during the life of the transaction.
Stable Origination/Underwriting/Servicing: BMW FS demonstrates adequate abilities as originator, underwriter and servicer, as evidenced by historical portfolio delinquency and loss experience and securitization performance.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of BMW FS 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 and would likely result in declines of CE 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, and are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from KPMG, LLP. The third-party due diligence focused on comparing or recalculating certain information with respect to 100 receivables. Fitch considered this information in its analysis and the findings did not have an impact on our analysis/conclusions. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Oct. 1, 2015. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'BMW Lease Trust 2015-2 -Appendix'. These R&Ws 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 June 12, 2015.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, available at 'www.fitchratings.com'.