Fitch Expects to Rate Ally Auto Receivables Trust 2016-2; Issues Presale
OREANDA-NEWS. Fitch Ratings expects to assign the following ratings and Rating Outlooks to the Ally Auto Receivables Trust 2016-2:
--$257,000,000 class A-1 notes 'F1+sf';
--$306,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$306,000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$97,130,000 class A-4 notes 'AAAsf'; Outlook Stable;
--$21,490,000 class B notes 'AAsf'; Outlook Stable;
--$17,910,000 class C notes 'Asf'; Outlook Stable;
--$13,300,000 class D notes 'BBBsf'; Outlook Stable.
KEY RATING DRIVERS
Stable Collateral Quality: The 2016-2 collateral is comparable to that of the last three transactions. While 2015-2016 AART pools had marginal declines in weighted-average (WA) FICO scores and slightly higher annual percentage rates (APRs), there have been positive shifts in certain collateral characteristics, including lower loan-to-value ratios (LTVs), stable new vehicle concentration and a decrease in longer term loans.
Credit Enhancement: Initial hard credit enhancement (CE) is unchanged from the prior three transactions, with 5.85% in hard CE for all classes of notes. Excess spread per annum is 2.26%, consistent with the prior AART transactions.
Strong Portfolio/Securitization Performance: Ally's 2009-2015 portfolio and securitization delinquencies and losses continue to perform well and were at low historical levels through 4Q15.
Consistent Origination/Underwriting/Servicing: Fitch currently rates Ally Financial 'BB+/B' with a Stable Rating Outlook. Ally demonstrates solid capabilities as an originator, underwriter, and servicer, as evidenced by its historical portfolio and securitization performance. Fitch deems Ally capable of adequately servicing 2016-2.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of Ally 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 could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of 2016-1 to increased losses over the life of the transaction. Fitch's analysis found that the notes display limited sensitivity to increased defaults and losses, showing no expected impact on the rating of the class A notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience a downgrade of one or more rating categories under Fitch's severe (2.5x base case loss) scenario.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence focused on comparing or recomputing certain information with respect to 224 loans from the computer generated automobile loan data file. Fitch considered this information in its analysis and the findings did not have an impact on 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.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled 'Ally Auto Receivables Trust 2016-2 -- 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 Jan. 6, 2016.