OREANDA-NEWS. Fitch Ratings has assigned Bavarian Sky S. A., Compartment German Auto Loans 5 notes the following expected rating:

Class A notes: 'AAA(EXP)sf'; Outlook Stable

Class B notes: not rated

Subordinated loan: not rated

The transaction is a securitisation of German auto loan receivables originated by BMW Bank GmbH, a wholly owned subsidiary of BMW AG, and granted to private (73%) and commercial (27%) customers. The issuer, Bavarian Sky S. A., is a bankruptcy-remote, limited liability special-purpose company incorporated under the laws of Luxembourg.

The assignment of the final rating is contingent on the receipt of final documents conforming to information already received.

KEY RATING DRIVERS

Performance of Underlying Receivables: Losses in BMW Bank's book are comparable to other captive auto loan originators in Germany. Fitch has used a default assumption of 1.7%. The default base case is based on the continuing strong performance of the latest vintages, a stable economy in Germany and the positive performance of the existing transactions.

High Balloon Exposure: Within the pool 98.5% of the loans (by balance) include a balloon component at loan maturity. Fitch assumes that if the borrower is not able to refinance the balloon amount (due to a BMW Bank default), or sell the car for the balloon amount (due to a downturn in the used-car market), the borrower will face a payment shock. The balloon risk was captured via a higher default multiple (7.2x for AAAsf).

Turbo Amortisation Feature: All available funds of the waterfall, after paying senior costs, swap and interest payments and the reserve fund refill, are allocated to pay down the class A notes until they are redeemed in full. This mechanism leads to a faster amortisation than in comparable transactions where notes often only amortise to target balances.

Provisions against Commingling Risk: Neither the servicer nor its parent company is publicly rated by Fitch. The transaction documentation foresees that commingling risk will be collateralised via a reserve, if BMW AG's creditworthiness falls below the level outlined in the agency's counterparty criteria. The agency therefore believes that this risk is adequately addressed within the transaction structure.

Servicer Continuity: The transaction does not have formalised back-up servicing arrangements, but Fitch believes the risk is mitigated by the strength of the servicer, the standard nature of the asset class and liquidity available through the reserve fund.

RATING SENSITIVITIES

Expected impact upon the note rating of increased defaults (class A):

Current rating: 'AAAsf'

Increase base case defaults by 10%: 'AAAsf'

Increase base case defaults by 25%: 'AA+sf'

Increase base case defaults by 50%: 'AA+sf'

Expected impact upon the note rating of decreased recoveries (class A):

Current rating: 'AAAsf'

Reduce base case recovery by 10%: 'AAAsf'

Reduce base case recovery by 25%: 'AAAsf'

Reduce base case recovery by 50%: 'AA+sf'

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

Current rating: 'AAAsf'

Increase default base case by 10%; reduce recovery base case by 10%: 'AAAsf'

Increase default base case by 25%; reduce recovery base case by 25%: 'AA+sf'

Increase default base case by 50%; reduce recovery base case by 50%: 'AA-sf'

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

DATA ADEQUACY

Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis.

Fitch conducted a review of a small targeted sample of BMW Bank GmbH's 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 asset pool 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.

-Default and loss data provided by BMW Bank GmbH for the period from 1 January 2009 to 31 March 2016

-Total book volume data provided by BMW Bank GmbH for the period from 1 January 2007 to 30 April 2016

-New business volume data provided by BMW Bank GmbH for the period from 1 January 2007 to 30 April 2016

-Delinquency data provided by BMW Bank GmbH for the period from 1 January 2007 to 30 April 2016

-Prepayment data provided by BMW Bank GmbH for the period from 1 January 2007 to 30 April 2016

REPRESENTATIONS AND WARRANTIES

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016.