OREANDA-NEWS. Fitch Ratings has assigned Swiss Car ABS 2015-1 AG's asset-backed class A notes a final rating, as follows:

CHF310.4m Class A notes, due November 2025 (ISIN: CH0304055806): 'AAAsf'; Outlook Stable
Class B notes: 'A+(EXP)sf' withdrawn as the notes were not issued on the closing date
CHF102.0m subordinated loan, due November 2025: not rated

The transaction is a securitisation of auto lease receivables originated to Swiss companies and individuals by AMAG Leasing AG (ALAG). The transaction's portfolio almost exclusively comprises lease contracts backed by vehicles of the VW group.

The class A notes are denominated in Swiss francs and pay fixed interest, which is paid out annually during a three-year revolving period. The notes' coupon will double when the transaction enters amortisation. Since the receivables also pay fixed interest in Swiss francs, there are no interest rate or currency mismatches.

KEY RATING DRIVERS
Experienced Originator's Issuance Debut
This is ALAG's first securitisation of lease receivables. ALAG will also service the portfolio from closing. Fitch conducted an operational review at the originator's premises and deems ALAG a capable servicer. A replacement servicer facilitator is contracted and will appoint, on a best-efforts basis, a substitute servicer should ALAG fail to perform its duties. The available reserves provide adequate liquidity coverage to bridge the time required to find a replacement servicer if needed.

Residual Value (RV) Drives Risk
The securitised lease payments include the RV at contract maturity. During the replenishment period, the RV portion can increase up to half of the overall pool. Dealers are obliged to pay the contractual RV to the issuer. However, a dealer default would expose the issuer to the risk of RV losses when used vehicle prices decline. Fitch assumes 'AAA' RV losses of 17.0%, while instalment losses at 'AAA' are 6.1%.

Link to VW Emission Allegation
The securitised portfolio comprises almost exclusively VW vehicles. About 10% of leases in the pool (by volume) were reported as being backed by vehicles affected by VW's nitrogen oxide emission test manipulation. Additionally, an estimated share of 5% of the pool volume could be affected by VW's disclosure around carbon dioxide irregularities. Fitch has incorporated additional stresses in its recovery rate and RV assumptions for both types of affected vehicles.

Limited Pool Migration Risk
Fitch considers the risk of a pool migration during the revolving period towards more risky characteristics as moderate, as replenishment criteria are close to the initial pool's attributes. Nevertheless, the replenishment period exposes investors to an increased risk of adverse economic developments and a decline in used car prices, as considered in Fitch's stressed default and recovery expectations.

RATING SENSITIVITIES
Fitch tested the rating sensitivity of the notes to various scenarios, including an increase in the base case default rate and/or a decrease in the base case recovery rate for the portfolio, combined with an increase in market value stresses for used vehicles returned at lease contract maturity. The model-implied sensitivities indicate that a joint increase in the base case default rate and market value stresses by 50%, together with a decrease in the base case recovery rate by 50%, may result in a downgrade of the class A notes to 'AAsf'.

We further tested additional stresses in relation to the emission allegations by increasing the additional stresses for affected vehicles, and by an extension of stresses to non-affected vehicles. The agency also tested rating sensitivities to an increased share of affected vehicles in the portfolio. The model-implied sensitivities indicate that additional stresses of 25% for affected vehicles and 10% for non-affected vehicles would not result in a downgrade of the class A notes. Further, an increase of affected vehicles in the portfolio would not lead to a downgrade of the class A notes.

TRANSACTION CHARACTERISTICS
The transaction features a revolving period of up to three years. During the replenishment phase, the issuer will apply collections from the receivables portfolio to purchase additional assets from ALAG, subject to certain replenishment criteria being met.

The initial transaction pool as of 24 November 2015 totalled CHF400m and comprised 18,417 leases to 17,803 customers with an average current outstanding lease balance of CHF21,719. RVs represent 47.8% of the initial pool. The portfolio is well distributed across Switzerland and shows no significant single-lessee concentrations, with the largest 10 customers having a total share of 0.4%.

DUE DILIGENCE USAGE
Fitch received a third party assessment conducted on the asset portfolio information prior to transaction announcement.

DATA ADEQUACY
Fitch conducted a review of a small targeted sample of ALAG's 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. Fitch was also provided with the volume of vehicles in the pool affected by VW's alleged emission manipulation.
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:
- Line-by-line information on the transaction portfolio, including pool stratifications.
- Origination volumes since the beginning of 2009 for all sub-portfolio combinations of private/commercial lessees and new/used vehicles, and detailed origination characteristics such as the development of loan-to-value ratios and contractual RV bands.
- Dynamic, quarterly delinquency data from January 2009 for all sub-portfolio combinations of private/commercial lessees and new/used vehicles.
- Static, quarterly default and recovery vintages since the beginning of 2009 for all sub-portfolio combinations of private/commercial lessees and new/used vehicles.
- Dynamic, quarterly prepayment data from January 2009 for all sub-portfolio combinations of private/commercial lessees and new/used vehicles.

Fitch has also used performance data from Fitch-rated Swiss peer transactions, and from peer originators in its analysis to supplement the data provided by the originator.