CHICAGO--()--Fitch Ratings has assigned the following ratings and Rating Outlooks to the notes issued by Volkswagen Auto Loan Enhanced Trust (VALET) 2013-1:
--Class A-1 asset-backed notes 'F1+sf';
--Class A-2 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
Strong Collateral Quality: The weighted average (WA) FICO of 763 is consistent with recently issued VALET transactions and, combined with the strong internal credit tier distribution, indicates a strong borrower. However, the pool contains a higher concentration of extended term loans, which have experienced greater losses historically.
Sufficient Credit Enhancement (CE): 2013-1 incorporates a sequential-pay structure. Initial CE is 3.10% of the initial adjusted pool balance, growing to 3.50% of the initial securitization value. Annual excess spread is expected to be 1.81%. CE is sufficient to cover Fitch's 'AAAsf' stressed loss expectation.
Strong Portfolio/Securitization Performance: Losses and delinquency levels on VCI's portfolio and prior securitizations have improved dramatically from peak levels in 2007 and 2008 and stabilized at lower levels.
Unstable Economic Outlook: A slower recovery and potential for volatility could affect delinquencies and losses. Fitch's analysis accounts for this risk by including poorer performing vintages from the recent recession in the base case loss analysis.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of VCI would not impair the timeliness of payments on the securities.
Stable Origination/Underwriting/Servicing: Fitch believes VCI to be a capable originator, underwriter, and servicer. These capabilities are further evidenced by historical portfolio delinquency and loss experience and securitization performance.
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. Fitch evaluated the sensitivity of the ratings assigned to VALET 2013-1 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, 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 remaining investment grade, under Fitch's severe (2.5x base case loss) scenario.
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Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Criteria for Rating US Auto Loan ABS' (April 16, 2012).
Applicable Criteria and Related Research
Global Structured Finance Rating Criteria
U.S. Auto Lease ABS (Performance Snapshot)