OREANDA-NEWS. Fitch Ratings has affirmed E-Carat 3 plc's GBP303m class A notes at 'AAAsf' with a Stable Outlook and GBP23.7m class B notes at 'AAsf' with a Positive Outlook.

E-CARAT UK plc is a securitisation of auto loan receivables originated by GMAC UK plc, which is also the servicer. The securitised portfolio consists of secured, fixed-rate loans advanced to UK residents. As of end-December 2014, the collateral pool consisted of 47,912 auto loan receivables and the transaction balance is split into new (80.4%) and used (19.6%) vehicle loans. No balloon loans are included in the static transaction.

KEY RATING DRIVERS
The Positive Outlook on the class B notes reflects the transaction's good performance to date. As of December 2014, the outstanding class A notes accounted for 71.4% of their initial balance and credit enhancement had increased to 15.9% from 12.3% for the class A notes and to 9.1% from 7.3% for the class B notes. Credit enhancement is provided by overcollateralisation, the reserve fund and a subordinated loan.

Cumulative defaults and 30-days plus delinquency ratios have been low since inception. The reserve fund has been fully funded at the required amount and prepayments have been in line with Fitch's expectations.

Fitch expects the performance of UK consumer ABS transactions to remain stable, based on the agency's expectations for future performance, a steady economic outlook and a stable interest rate environment. Fitch forecasts GDP growth of 2.6% for 2015 and 2.3% in 2016, based on its December Global Economic Outlook Report. The agency believes annual UK unemployment rates for 2015 and 2016 will stay stable and eventually drop from 5.7% forecasted for 2015 to 5.5% in 2016.

RATING SENSITIVITIES
Based on the positive performance to date, Fitch has made a downward revision to its lifetime default base case assumption for the transaction. The lifetime default base case assumption for the original balance of the transaction has been lowered to 1.75% from 2% at closing. Other assumptions remain unchanged.

Expected impact upon the note rating of increased defaults (defaults + voluntary terminations) for Class A / Class B:
Current Rating: 'AAAsf'/ 'AAsf'
Increase base case defaults by 10%: 'AAAsf'/ 'AA-sf'
Increase base case defaults by 25%: 'AA+sf'/ 'AA-sf'

Expected impact upon the note rating of decreased recoveries (Class A / Class B):
Current Rating: 'AAAsf' / 'AAsf'
Reduce base case recovery by 10%: 'AAAsf' / 'AA-sf'
Reduce base case recovery by 25%: 'AAAsf' / 'AA-sf'

Expected impact upon the note rating of increased losses (default + voluntary termination) and reduced recoveries (Class A/ Class B):
Current Rating 'AAAsf' / 'AAsf'
Increase default base case by 10%; reduce recovery base case by 10%: 'AA+sf' / 'AA-sf'
Increase default base case by 25%; reduce recovery base case by 25%: 'AA+sf' / 'A+sf'