OREANDA-NEWS. Fitch Ratings has upgraded Bavarian Sky S. A., Compartment German Auto Loans 2's class B notes and affirmed the class A notes, as follows:

EUR190.2m class A notes: affirmed at 'AAAsf'; Stable Outlook

EUR53.8m class B notes: upgraded to 'AAAsf' from 'AA+sf'; Stable Outlook

The transaction is a securitisation of German auto loan receivables granted to private and commercial customers and originated by BMW Bank GmbH, a wholly owned subsidiary of BMW AG.

KEY RATING DRIVERS

Robust Asset Performance

The rating actions reflect the transaction's good performance to date with low defaults and increased credit enhancement for the class A and B notes. Since closing in July 2014, the asset pool's performance has been slightly better than the expectations in Fitch's initial rating analysis. Current cumulative losses are 0.3%, lower than Fitch's point in time expectation of 0.6%. The current pool composition is largely similar to the initial pool with the exception of an increase in the share of balloon loans due to the slower amortisation of contracts with a balloon component.

Increased Credit Enhancement

Credit enhancement, which consists of overcollateralisation and a non-amortising reserve fund, has increased to 44.0% from 9.0% at closing for the class A notes and 27.0% from 3.8% for the class B notes.

Stable Economic Outlook

The strong labour market with unemployment at an historical low in Germany supports our expectation of a limited increase in defaults (cumulative defaults to date stand at 0.6%). Furthermore, the transaction has been reporting low delinquencies (current 30+ days at 0.6%) and strong recoveries. Overall, we consider the economic conditions in Germany to be supportive of borrowers' ability to pay.

Fitch has revised its lifetime default base case to 1.2% from 1.5% while maintaining its recovery base case of 60%.

RATING SENSITIVITIES

Expected impact upon the note rating of increased defaults and decreased recoveries (class A/B):

Current Ratings: 'AAAsf'/'AAAsf'

Increase default base case by 25%; reduce recovery base case by 25%: 'AAAsf'/'AAAsf'

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

-Monthly investor reports provided by BMW Bank GmbH up to 31 May 2016 (June reporting date)

-Loan level data from the European Data Warehouse (Edwin) as at 31 May 2016