OREANDA-NEWS. March 23, 2015. Fitch Ratings has affirmed Red & Black Auto Lease Germany 1 S.A.'s EUR191.9M class A notes at 'AAAsf' with Stable Outlook.

The transaction is a securitisation of lease receivables originated in Germany by ALD Auto Leasing D GmbH (ALD) and associated residual value (RV) claims.

KEY RATING DRIVERS
The affirmation reflects the transaction's good performance to date. According to the March 2015 investor report, the observed cumulative default rate since closing in May 2013 is 0.6% of the initial pool balance including additionally purchased assets. The cumulative loss rate for the same period is 0.3%. Overall delinquencies remain low. Accounts currently delinquent for 30+ days are 0.3% of the total pool balance.

The transaction featured a one-year revolving period, which ended in May 2014. Currently, the total pool amount is EUR363.3m, which is spread over 27,860 lease contracts. Of the balance, 78.7% are passenger car leases and 21.3% are light commercial vehicle leases. The pool is subject to lessee concentration, as the largest lessee account for 2.1% of the total pool balance and the top 20 lessees comprise about 14.4%. The current portfolio composition is better than that Fitch assumed when constructing the worst case with respect to debtor diversification and yield.

The transaction also securitises the RV component of lease contracts. The share of RV claims in the overall portfolio increases over time as the RV is only due at maturity. The current RV share is 64.7% as of the March 2015 reporting date, compared with 57.7% at the end of the revolving period. Due to the material RV amount in the pool, the performance of the class A notes is dependent on credit risk and RV risk of the underlying lease contracts.

The rated notes benefit from credit enhancement consisting of overcollateralisation through subordination and a non-amortising reserve fund. The notes started to amortise sequentially since the end of the revolving period in May 2014. Credit enhancement for class A notes has increased to 48.8% from 31.0%. Additionally, the transaction benefits from a substantial amount of excess spread that has been sufficient to cover the losses realised so far.

ALD acts as the originator and servicer. ALD is a wholly owned subsidiary of Societe Generale (SG; A/Negative/F1). The transaction features diverse reserves that will be funded if SG, as the funding entity, is downgraded below 'A'/'F1' or upon an insolvency of ALD. The contingent reserves address, among other risk factors, commingling risk and set-off risk.

Fitch expects the performance of German consumer ABS transactions to remain stable.

RATING SENSITIVITIES
Fitch has maintained its base case assumptions set at the transaction closing date.

Expected impact upon the note rating of increased defaults for Class A:
Current Rating: 'AAAsf'
Increase base case defaults by 25%: 'AAAsf'

Expected impact upon the note rating of decreased recoveries for Class A:
Current Rating: 'AAAsf'
Decrease base case recovery by 25%: 'AAAsf'

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

Initial Key Rating Drivers and Rating Sensitivities are further described in the New Issue Report published on 23 May 2013.

TRANSACTION CHARACTERISTICS
The leases are granted to German customers, which are either commercial or public entities. The notes are euro-denominated and pay fixed interest monthly. No swap is in place as there is no interest rate risk (the receivables in the asset pool as well as the notes pay a fixed interest rate) or a currency mismatch (both underlying assets and the notes are euro-denominated). After a one-year revolving period, the transaction started amortising since May 2014.