OREANDA-NEWS. Fitch Ratings has affirmed German Mittelstand Equipment Finance SA, Compartment 2, as follows:

EUR196.0m class A notes: 'AAAsf'; Stable Outlook
EUR13.0m class B notes: 'AAsf'; Outlook revised to Positive from Stable
EUR18.3m class C notes: 'Asf'; Outlook revised to Positive from Stable

The transaction is a securitisation of receivables (without residual values) from lease contracts with German commercial businesses or self-employed professionals, originated by IKB Leasing GmbH, which is entirely owned by IKB Deutsche Industriebank AG.

KEY RATING DRIVERS
The transaction is revolving for 12 months and the notes will start amortising in August 2015. The portfolio composition has remained largely unchanged since closing. Due to the sequential amortisation of the notes, credit enhancement for the class A notes - currently 25.4% - is expected to increase.

Arrears of more than 30 days past due were 0.26% as of June 2015. Longer arrears are significantly lower; 60+ days arrears were 0.05% and 90+ days arrears 0.01% of the current pool balance, indicating a high cure rate of claims overdue. The arrears trend has been volatile, which Fitch attributes to the performance volatility of the commercial assets in the portfolio.

Cumulative defaults and cumulative losses are at 0.67% and 0.57%, respectively. These values are in line with the agency's expectation of 0.5% defaults and 0.5% losses at this point in life of the transaction. Recoveries (15.1% of total defaults) have started to come through and Fitch expects that more will materialise given that it is still relatively early in the transaction and the default definition is 180 days. So far, all defaults have been covered by excess spread via the principal deficiency ledgers.

Fitch has maintained its default and recovery base case rates at 6.0% and 65%, respectively.

The downgrade of the direct debit collection account bank (Bayerische Landesbank) resulted in a counterparty trigger breach. The bank was replaced by Societe Generale SA, Zweigniederlassung Frankfurt in 16 July 2015, which in conjunction with the pledge to the SPV sufficiently mitigates commingling risk with respect to direct debit payers. The commingling reserve covering the commingling risk with respect to self-payers of the other collection account is fully funded.

RATING SENSITIVITIES
Fitch's rating sensitivity analysis remains the same as outlined in the New Issue Report published on 31 July 2014 as the transaction is still revolving.

Expected impact upon the note rating of increased defaults (class A/B/C):
Current Ratings: 'AAAsf'/'AAsf'/'Asf'
Increase base case defaults by 10%: 'AA+sf'/'AAsf'/'Asf'
Increase base case defaults by 25%: 'AA+sf'/'AA-sf'/'Asf'
Increase base case defaults by 50%: 'AAsf'/'A+sf'/'BBB+sf'

Expected impact upon the note rating of reduced recoveries (class A/B/C):
Current Ratings: 'AAAsf'/'AAsf' /'Asf'
Reduce base case recovery by 10%: 'AAAsf'/'AAsf'/'Asf'
Reduce base case recovery by 25%: 'AA+sf'/'AAsf'/'Asf'
Reduce base case recovery by 50%: 'AA+sf'/'AA-sf'/'A-sf'

Expected impact upon the note rating of increased defaults and decreased recoveries (class A/B/C):
Current Ratings: 'AAAsf'/'AAsf'/'Asf'
Increase default base case by 10%; reduce recovery base case by 10%: 'AA+sf'/'AAsf'/'Asf'
Increase default base case by 25%; reduce recovery base case by 25%: 'AAsf'/'A+sf'/'A-sf'
Increase default base case by 50%; reduce recovery base case by 50%: 'Asf'/'A-sf'/'BBB-sf'

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the 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 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.
- Monthly investor report provided by IKB Leasing GmbH as at 10 June 2015
- Executed copies of documents on the replacement of the collection account bank provided by Hengeler as at 16 July 2015.