Fitch Rates World Omni Auto Receivables Trust 2015-B
--$216,000,000 Class A-1 Notes 'F1+sf';
--$280,000,000 Class A-2a Notes 'AAAsf'; Outlook Stable;
--$133,000,000 Class A-2b Notes 'AAAsf'; Outlook Stable;
--$234,000,000 Class A-3 Notes 'AAAsf'; Outlook Stable;
--$125,000,000 Class A-4 Notes 'AAAsf'; Outlook Stable;
--$21,160,000 Class B Notes 'AAsf'; Outlook Stable.
KEY RATING DRIVERS
Consistent Pool Quality: 2015-B has relatively stable credit quality with a weighted average (WA) Fair Isaac Corp. N.A (FICO) score of 724, within range of recent 2014 - 2015 pools, although marginally lower. New vehicles total 97%, and the pool is geographically concentrated in the Southeast, consistent with historical World Omni originations.
High Percentage of Extended-Term Loans: Loans with original terms greater than 60 months total 76.50% in 2015-B. Extended-term loans have historically produced higher loss rates. Mitigating this somewhat is that the borrowers within this longer term range have strong obligor FICO scores. Fitch accounted for this risk in its determination of the loss proxy.
Adequate Credit Enhancement Structure: Credit enhancement (CE) in 2015-B is consistent with prior transactions. The structure is able to support multiples of Fitch's base case loss proxy of 2.10% that are commensurate with the expected ratings.
Evolving Wholesale Market: The U.S. wholesale vehicle market is normalizing 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.
Stable Portfolio/Securitization Performance: World Omni's portfolio and securitization delinquency and loss performance has improved since 2009 and has been relatively stable in 2013-2015, despite coming off record lows.
Consistent Origination/Underwriting/Servicing: Fitch believes World Omni to be a capable originator, underwriter, and servicer for 2015-B as evidenced by the historical performance of its managed portfolio and securitizations.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of World Omni would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn could result in Fitch taking negative rating actions on the notes.
Fitch evaluated the sensitivity of the ratings assigned to World Omni Auto Receivables Trust 2015-B to increased credit losses over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and credit losses. The sensitivity analysis shows a potential downgrade of one category for both classes of notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of two or more rating categories under Fitch's severe (2.5x base case loss) scenario.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Ernst & Young LLP (EY). The third-party due diligence focused on an extract of 125 retail instalment sale contracts that were selected by EY and verified for details such as customer name and state, interest rate, monthly payment amount, original term, FICO etc. In that sample set all compared information was in agreement. Fitch considered this information in its analysis and concluded that the findings do not impact our analysis.
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. As such, no adjustments were made to Fitch's analysis.
Fitch's analysis of the Representation and Warranties (R&W) of this transaction can be found in 'World Omni Auto Receivables Trust 2015-B--Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in Fitch's June 2015 special report, 'Representations, Warranties, and Enforcement Mechanisms in the Global Structured Finance Transactions'.