OREANDA-NEWS. Fitch Ratings has assigned Asset-Backed European Securitisation Transaction Twelve S.r.l.'s notes ratings as follows:

EUR688.0m floating rate Class A notes, due in July 2029: 'AA+sf'; Outlook Stable
EUR72.0m floating rate Class B notes, due in July 2029: 'Asf'; Outlook Stable
EUR40.0m fixed rate Class M notes, due in July 2029: not rated

The transaction is a securitisation of performing fixed-rate auto loans advanced to Italian individuals, including VAT borrowers (ie, professionals and artisans) by FCA Bank S.p.A. (FCAB; BBB/Positive/F2), a joint venture between Fiat Chrysler Automobiles and Credit Agricole Consumer Finance.

KEY RATING DRIVERS
Low Default Expectations
Fitch expects lifetime default rates to be low compared to European peers for loans financing both the purchase of new and used cars, in line with the previous Italian FCAB deals (A-Best 10 and A-Best 9). Fitch's base cases are set to 1.75% and 3.25% for new cars and used cars, respectively.

When setting the base case and the 'AA+sf' multiple (6.5x) for the new cars sub-pool, Fitch took into account the performance volatility introduced by promotional campaigns (or lack thereof) which may affect origination vintages during the revolving period.

Higher Default Assumption for VAT Borrowers
Historical data shows that VAT borrowers (ie, professionals and artisans using the purchased vehicles for business purposes) typically perform worse than individuals purchasing a vehicle for private use, due to their heightened income volatility. The agency assigned a separate higher base case of 2.75% to this sub-pool, which only includes loans financing new cars.

Revolving Covenants Limit Portfolio Deterioration
At the end of the 27-month revolving period the pool may have more adverse features than the initial portfolio sold to the issuer. However, the agency believes that the revolving conditions envisaged by the transaction documentation adequately address this risk. Fitch assumed loss base cases predicated on the worst-portfolio composition at the end of the revolving period.

Insurance-Related Counterparty Risk
The securitised loans also finance the insurance premiums of certain policies sold with the vehicle. Should one of the insurance companies and FCAB jointly default, the issuer could be exposed to claims by borrowers. As the exposure towards the insurers during the revolving period could increase, Fitch tested the notes' resilience to higher losses than the full insurance exposure of the portfolio at closing.

RATING SENSITIVITIES
The following are the model-implied sensitivities from a change in selected input variables:

Class A notes
Stress on default rates:
- Increase in default rates up to 25%: 'AA+sf'
- Increase in default rates by 50%: 'AAsf'

Stress on recovery rates:
- Decrease in recovery rates by up to 50%: 'AA+sf'

Combined stress
- Decrease in recovery rates by 10% and increase in default rates by 10%: 'AA+sf'
- Decrease in recovery rates by 25% and increase in default rates by 25%: 'AAsf'
- Decrease in recovery rates by 50% and increase in default rates by 50%: 'A+sf'

Class B notes
Stress on default rates:
- Increase in default rates by 10%: 'A-sf'
- Increase in default rates by 25%: 'A-sf'
- Increase in default rates by 50%: 'BBB+sf'

Stress on recovery rates:
- Decrease in recovery rates by up to 50%: 'Asf'

Combined stress
- Decrease in recovery rates by 10% and increase in default rates by 10%: 'A-sf'
- Decrease in recovery rates by 25% and increase in default rates by 25%: 'BBB+sf'
- Decrease in recovery rates by 50% and increase in default rates by 50%: 'BBB-sf'

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

DATA ADEQUACY
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.

Fitch conducted a review of a small targeted sample of the originator's loan files and found the information contained in the reviewed files to be 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.
- Loan-by-loan data provided by FCAB as of 18 July 2015
- Historical data provided by FCAB as of April/May 2015
- Insurance exposure data provided by FCAB as of 18 July 2015

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Asset-Backed European Securitisation Transaction Twelve S.r.l. - Appendix, dated 10 August 2015 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.