News Column

Fitch to Rate Mercedes-Benz Auto Receivables Trust 2014-1; Issues Presale

June 30, 2014

NEW YORK--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: Mercedes-Benz Auto Receivables Trust 2014-1 (U.S. ABS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751280

Fitch Ratings expects to assign the following ratings and Rating Outlooks to the notes issued by Mercedes-Benz Auto Receivables Trust (MBART) 2014-1:

--$295,000,000 class A-1 'F1+sf';

--$343,100,000 class A-2 'AAAsf'; Outlook Stable;

--$375,870,000 class A-3 'AAAsf'; Outlook Stable;

--$110,500,000 class A-4 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

Strong Collateral Quality: The weighted average (WA) Fair Isaac Corp. (FICO) score of 767 is consistent with recently issued MBART transactions and, combined with the strong internal credit-tier distribution, indicates a strong borrower.

Increased Used Vehicle Concentration: Concentrations of used vehicles increased to 72.43% in 2014-1 from 61.38% in 2013-1, representing the highest level in any MBART transaction to date. The increase in used vehicles has resulted in a higher WA loan-to-value (LTV) ratio for the 2014-1 pool, which could result in higher loss severities on defaulted loans.

Sufficient Credit Enhancement: Total initial hard credit enhancement (CE) for class A notes is 2.75%. Yield supplement OC will be used to boost the transaction's annual percentage rate (APR), providing expected excess spread of 2.60%. CE is sufficient to cover in excess of a 5.0x multiple of Fitch's base case expected lifetime cumulative net losses (CNLs) of 1%.

Strong Portfolio/Securitization Performance: Mercedes Benz Financial Services' (MBFS) portfolio and securitization performance has been improving with low delinquencies and losses over the past three years. Performance has been supported by the improving U.S. economic recovery and stable used vehicle values.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of Daimler or MBFS would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

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 potential negative rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to Mercedes-Benz Auto Receivables Trust 2014-1 to increased losses over the life of the transaction. Fitch's analysis found that the class A notes display minimal sensitivity to a moderate increase in defaults and losses, showing potential downgrades of up to one notch, if at all, under Fitch's moderate (1.5x base case loss) scenario. However, class A notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.

Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying presale report, available at 'www.fitchratings.com or by clicking on the above link.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014;

--'Rating Criteria for U.S. Auto Loan ABS' (April 7, 2014);

--'Structured Finance Tranche Thickness Metrics' (July 29, 2011).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Rating Criteria for U.S. Auto Loan ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738718

Structured Finance Tranche Thickness Metrics

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646951

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=837114

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Joyce Fargas, +1 212-908-0824

Director

Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004

or

Committee Chairperson

Hylton Heard, +1 212-908-0214

Senior Director

or

Media Relations:

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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