OREANDA-NEWS. September 21, 2015.  Fitch Ratings has affirmed E-Carat 2 plc's upgraded GBP21.5m class B notes to 'AA+sf' from 'AA' and affirmed GBP160m class A notes at 'AAAsf'. The Outlook is Stable.

E-CARAT 2 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-July 2015, the collateral pool consisted of 30,449 auto loan receivables and the transaction balance is split into new (80.5%) and used (19.5%) vehicle loans. No balloon loans are included in this static transaction.

KEY RATING DRIVERS
The affirmation and upgrade reflect the transaction's sound performance to date. As of end-July 2015, the outstanding class A notes accounted for 31.7% of their initial balance. Credit enhancement, provided by overcollateralisation and a reserve fund, has increased to 27.4% from 12.4% for the class A notes and to 14% from 6.9% for the class B notes.

Cumulative defaults and 30-days plus delinquency ratios have been low since closing in October 2013 and the reserve fund is fully funded at the required amount.

Fitch expects the performance of UK consumer ABS transactions to remain stable based on a steady economic outlook. Fitch forecasts GDP growth of 2.5% for 2015, and 2.3% in 2016, according to its July Global Economic Outlook Report. The agency projects annual UK unemployment rates at 5.4% in 2015 and 5.3% in 2016.

Based on the amortisation to date and the positive performance, 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 1.35% from 2% at closing. Other assumptions remain unchanged.

RATING SENSITIVITIES
Expected impact upon the note rating of increased defaults (class A/B):
Current Rating: 'AAAsf' / 'AA+sf'
Increase base case defaults by 10%: 'AAAsf'/ 'AA+sf'
Increase base case defaults by 25%: 'AAAsf'/ 'AA+sf'

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

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.

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 reports provided by GMAC UK, up to 31 July 2015 (August reporting date)
- Updated loan by loan file with cut-off date 31 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 E-Carat 2 plc - Appendix, dated 18 October 2013 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.