OREANDA-NEWS. S&P Global Ratings today affirmed its 'AAA (sf)' credit rating on Cars Alliance Auto Loans France Master FCT's (CAAL France Master) class A notes (see list below).

Today's affirmation follows our updated credit and cash flow analysis considering an updated performance data set provided by the seller following the April 2016 restructuring, and using one recent transaction investor report (dated July 2016).

In April 2016, the arrangers extended the initial revolving period by four years, up to July 2020, as planned in the closing documentation. During the revolving phase, the structure ensures that all of the defaulted receivables are provisioned for through the acquisition of new performing receivables. If available excess spread is not sufficient to cure defaulted receivables, the revolving phase will end. Since closing, this default provisioning mechanism has ensured that all defaults have been cured.

On the asset side of the transaction, as part of the April 2016 restructuring, the arrangers have also amended some of the portfolio replenishment limits. The maximum covenanted exposure to used cars has increased to 50% from 40%, while the maximum allowed exposure to balloon loans financing used cars increased to 5% from 4%. We have captured these evolutions, negative from a credit perspective, by adjusting accordingly the composition of our worst-case pool portfolio. All other concentration limits remain unchanged. Balloon loans are still limited to 40% of the pool, while commercial borrowers are still capped at 6% of the pool. The discount rate used to determine the purchase price of the receivables remains unchanged at 7%.

On the liability side of the transaction, the arrangers have implemented the following changes: The size of the subordinated class B notes (not rated) has decreased to 13.8% from 15.1% of transaction's size, while the size of the cash reserve has remained constant at 1.0% of notes' size. This 1.3% decrease of hard credit enhancement has been partly compensated for by an increase in the available soft credit enhancement. The annual excess spread will benefit from the decrease in the covenanted maximum weighted-average fixed coupon of the senior notes to 2% from 4%, originally. Our adjusted recovery credit assumptions under our European auto asset-backed securities (ABS) criteria are also slightly more favorable at the 'AAA' rating level (see "Methodology And Assumptions For European Auto ABS," published on Oct. 15, 2015).

We updated our credit risk analysis based on the application of our European auto ABS criteria, using updated cumulative gross loss and recovery vintage curves for each portfolio subpool.

Our cumulative gross loss base-case assumptions remain unchanged at 3.6% and 6.5% for amortizing loans granted to private borrowers to finance new cars and used cars, respectively. They are also unchanged at 4% and 7% for balloon loans granted to private borrowers to finance new cars and used cars, respectively, and at 3.5% for amortizing loans granted to commercial borrowers. Our unchanged assumptions reflect the steady performance observed in the updated data the originator provided. We also maintained our 'AAA' default stress multiple at the mid-low level of 4.3x, considering the originator's long securitization experience and the good quality of the data provided.

Under our European auto ABS criteria, based on the provided recovery performance data, we considered at all rating levels a stressed recovery rate of 26%, slightly higher than the 22% stressed 'AAA' recovery rate considered under our former criteria. We maintained our low and high prepayment rate assumptions at 24.0% and 0.5%. Finally, in accordance with our European auto ABS criteria, we considered a balloon payment gross loss rate of 6.5%, which is broadly in line with the 4.8% balloon payment net loss rate we considered in our previous review (see "Rating Affirmed On French ABS Transaction Cars Alliance Auto Loans France Master FCT's Class A Notes," published on June 3, 2015).

Taking into account the results of our updated credit and cash flow analysis, we consider that the available credit enhancement for the class A notes is commensurate with the currently assigned rating. We have therefore affirmed our 'AAA (sf)' rating on the class A notes.

CAAL France Master is a French auto ABS transaction that securitizes a pool of fixed-rate amortizing and balloon auto loans originated to French retail customers by DIAC S. A., the captive finance company of the Renault-Nissan alliance and one of the main player in the French auto lending market.