OREANDA-NEWS. Fitch Ratings has upgraded E-Carat S.A., Compartment 5's class B notes and affirmed the class A notes, as follows:

EUR2501.m class A notes (ISIN: XS0885855691), due November 2020: affirmed at 'AAAsf'; Outlook Stable
EUR30.6m class B notes (ISIN: XS0885855931), due November 2020: upgraded to 'AA+sf' from 'AAsf'; Outlook Positive

The transaction is a static true sale securitisation of loans granted to German clients. Since December 2013, the originator, GMAC Bank GmbH (BB+/Positive/B) has been an indirect wholly-owned subsidiary of GM Europe Service GmbH (GM Europe).

KEY RATING DRIVERS
The upgrade of the class B notes reflects an increase in credit enhancement as a result of the portfolio's amortisation and its positive performance since issuance.

In Fitch's view, the stable labour market in Germany with a moderate unemployment rate supports a limited increase in defaults. Furthermore, the transaction has been reporting low delinquencies.

The portfolio had amortised down to EUR308.8m as of the November 2014 portfolio data from the original amount of EUR558.7m in March 2013. The portfolio's composition has remained largely unchanged over the past 12 months, with the exception of a slight increase of balloon loans to 90.2% from 83.1%. This is due to proportionally smaller amortisation before maturity of this loan type compared with amortising loans. The agency has taken the balloon risk into consideration.

The proceeds from pool amortisation have been applied to redeem the senior class A notes, which has led to an increase in credit enhancement for the class A notes to 20.9% from 12.4% and to 11% from 6.9% for the class B notes since issue. Fitch views the strictly sequential amortisation of the notes as a strength by further increasing credit enhancement.

The reported defaults and losses have been lower than Fitch's expectations. Therefore, we have revised our default rate expectation for the transaction's life to 1.7% from 2%, indicating a remaining life base case of 1.3%.

RATING SENSITIVITIES
The ratings would be sensitive to a sharp increase in the unemployment rate causing significantly higher default rates. However, the transaction has built up credit enhancement through deleveraging, which would reduce downward pressure on the rated notes resulting from an unlikely increase in unemployment rate and defaults.

The ratings would also be sensitive to significantly lower than expected recoveries from defaulted loans, e.g. in case of a severe downturn of the German used car market.

Expected impact upon the note rating of increased defaults and reduced recoveries:
Class A:
Current Rating: 'AAAsf'
Increase base case defaults by 25%: 'AAAsf'; reduce base case recoveries by 25%: 'AAAsf'

Class B:
Current Rating: 'AA+sf'
Increase base case defaults by 25%: 'AA+sf'; reduce base case recoveries by 25%: 'AA+sf'

Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue report dated 18 March 2013 at www.fitchratings.com.