Fitch Affirms Volvo Financial Equipment LLC, Series 2015-1
OREANDA-NEWS. Fitch Ratings has affirmed the following classes of Volvo Financial Equipment LLC, Series 2015-1:
--Class A-2 at 'AAAsf'; Outlook Stable.
--Class A-3 at 'AAAsf'; Outlook Stable.
--Class A-4 at 'AAAsf'; Outlook Stable;
--Class B at 'AAsf'; Outlook to Positive from Stable;
--Class C at 'Asf'; Outlook to Positive from Stable.
Certificates not rated.
KEY RATING DRIVERS
The affirmations of all outstanding classes reflect loss coverage levels consistent with the current ratings. As of the February 2016 reporting period, cumulative net losses totaled 40 basis points, and as such, the transaction is extrapolating below Fitch's initial base case loss proxy. The Stable Outlook for the class A notes reflects Fitch's expectation for loss coverage and credit enhancement to continue to improve as the transaction amortizes. The Outlook revision to Positive for classes B and C reflects the possibility for positive rating actions in the next 12 to 18 months.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case and could result in potential rating actions on the notes. At initial rating, Fitch evaluated the sensitivity of the ratings assigned to VFET 2015-1 to increased cumulative net losses (CNLs) over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and CNL, showing a potential downgrade of one category under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to three rating categories, although still remain investment grade, under Fitch's severe (2.5x base case loss) scenario. Initial key rating drivers and rating sensitivities are further described in the new issue report published March 5, 2015.