OREANDA-NEWS. Fitch Ratings has taken the following rating action on the fourth series of senior quotas issued by Fundo de Investimento em Direitos Creditorios Banco GMAC - Financiamento a Concessionarias (FIDC Banco GMAC):

--Local currency long-term rating downgraded to 'BBBsf' from 'BBB+sf' and removed from Rating Watch Negative; Negative Outlook assigned.

Fitch has also affirmed the national scale long-term rating on the quotas at 'AAAsf(bra)' with a Stable Rating Outlook.

FIDC Banco GMAC is a securitization of General Motors do Brasil Ltda. (GM do Brasil; the manufacturer) franchised dealer network loans originated by Banco GMAC S.A. (Banco GMAC; National Scale rating 'AA+(bra)'/Outlook Stable) to finance the acquisition of new and used vehicles from the manufacturer. GM do Brasil is a subsidiary of General Motors Company (GM; Issuer Default Rating [IDR] 'BBB-'; Outlook Stable). Citibank Distribuidora de Titulos e Valores Mobilirios S.A. (Citibank DTVM) acts as trustee, while Credit Agricole Brasil S.A. Distribuidora de Titulos e Valores Mobilirios (Credit Agricole Brasil) as co-manager to the transaction. Banco GMAC is hired as servicer of any delinquent loans.

The rating downgrade reflects the transaction's exposure to direct support counterparties in relation to the maximum achievable rating on the notes following Fitch's recent downgrade of Brazil's sovereign ratings to 'BB' from 'BB+'.

The removal of the rating watch negative reflects the implementation of the structural changes of the qualified investment provisions in the transaction documents.

KEY RATING DRIVERS

Counterparty Exposure
The most recent sovereign downgrade increases counterparty risks in the transaction as various banks have been downgraded. The transaction bank account is domiciled at Citibank Brazil, but collections are invested on repurchase agreements (repos) issued by any foreign-owned financial institution in Brazil whose controlling parent is rated at least 'A-' by Fitch. Investments in money market funds managed by the trustee will be limited to 5% of the transaction's capital structure.

Fitch believes recent changes on transaction documents reduce direct counterparty exposures related to qualified investments considered speculative grade. However, Fitch views the credit quality of these eligible investments by financial institutions as capped at up to two notches above the local currency sovereign rating of Brazil.

Brazil's Sovereign Rating
The transaction is rated above Brazil's sovereign IDR of 'BB'/Outlook Negative and country ceiling of 'BB+'. The transaction is not explicitly capped by the sovereign IDR and country ceiling as the assets and rated notes are denominated in BRL; however, structured finance transactions cannot be completely delinked and are ultimately constrained by the overall sovereign environment. The short-term nature of Banco GMAC's receivables (historical average 34-day payment term) and the various triggers limit the transaction's exposure to the potentially severe macroeconomic stresses during a sovereign crisis (including increase in interest rates among others).

No Commingling Risk
In the beginning of December 2015, the collection mechanism was changed so that dealers make principal payments directly into the transaction account, which is domiciled at Citibank. Interest is charged separately, as it depends on the timing of payment, and also because a portion of it is owed by GM due to subsidies that might apply.

General Motors Company's (GM) Rating
The credit quality of GM Brasil dealerships and the value of Chevrolet/GM vehicles are dependent on the on-going provision of services, parts, accessories, customer warranties, and the continued manufacturing of new vehicles by GM. GM currently has an IDR of 'BBB-'/Outlook Stable.

Lower Exposure to Domestic Risks vs. Other Local Transactions
Dealership payment performance and MPR levels have declined in the event of a local economic downturn. Nevertheless, the credit enhancement levels were assessed in the context of catastrophic dealership default assumptions related to a scenario of liquidation of GM globally. Such exposure overrides stresses related to the emerging market characteristics of Brazil, and therefore, common exposures related to other transactions rated above the sovereign.

Good and Stable Performance of Receivables
The receivables pool continues to show good and stable performance despite the current economic downturn, with no losses or delinquencies above 30 days as of April 2016. Average payment term over the last 12 months ending April 2016 was 37 days, which resulted in modest monthly payment rates (MPRs) varying between 34% and 57%. Although the structure allows the top 13 obligors to reach 33% of the portfolio, surveillance data shows that top 14 has been, during the last 12 months, around 26% at most.

RATING SENSITIVITIES
The ratings of the fourth series of senior quotas are sensitive to decreases in available credit enhancement as a result of higher default rates and lower recoveries on the loans than those assumed for Fitch's analysis. The ratings are also sensitive to the ratings of the Government of Brazil. A further downgrade on the credit quality of the sovereign and/or direct counterparties would likely result in a change in the rating of the rated notes.