OREANDA-NEWS. Fitch Ratings has assigned Hyundai Capital Auto Funding XI Limited's Class A1 and Class A2 notes (collectively the Class A notes) due Oct 2021 'AAAsf' ratings with Stable Outlook. The rating actions are as listed below:

USD240m senior secured Class A1 notes : 'AAAsf'; Outlook Stable
USD60m senior secured Class A2 notes: 'AAAsf'; Outlook Stable

The transaction is a securitisation of auto loan receivables in South Korea, originated by Hyundai Capital Services, Inc. (HCS, BBB+/Stable/F2).

KEY RATING DRIVERS

The ratings and Outlooks reflect the 16.9% initial credit enhancement provided by an unrated subordinated class B certificate, a cash reserve funded at closing which covers three months of Class A note interest payments, senior expenses and servicer transition costs, the presence of early amortisation and servicer termination triggers, and a cross-currency swap provided by DBS Bank Ltd. (AA-/Stable/F1+), Seoul Branch.

The ratings are further supported by transfer and convertibility risk protection under the swap document to make the appropriate USD payments to the note issuer account if a transfer and convertibility event occurs in South Korea. The ratings are also underpinned by HCS's strong domestic franchise in the domestic auto financing market, solid servicing track record on its 58 originated domestic and international securitisation transactions, and the sound financial and legal structure of the transaction.

Fitch has analysed the credit risk of the underlying auto loans and derived the loss assumption of each auto loan product, based on the historical data provided by HCS, along with future expectations. Fitch's weighted average base case default rate for the portfolio, based on a worst product mix assumption, is 1.8%.

Fitch expects a stable ongoing performance of South Korean auto loan receivables, backed by steady unemployment (3.1% in October 2015). However, the agency believes that high household debt in South Korea and a potential rise in interest rates could put pressure on the performance of auto loan assets. Sharp deterioration in the consumer finance sector cannot be ruled out if employment were to weaken significantly or if interest rates were to rise very rapidly, although these are not Fitch's base cases.

RATING SENSITIVITIES
The 'AAAsf' rating may be downgraded if the weighted-average base-case default rate (worst product mix assumed) were to increase by 100% to 3.6%, from 1.8% assuming all other analytical variables remaining constant.
The ratings address the timely payment of interest and the ultimate payment of principal by the legal final maturity in October 2021.

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

Data Adequacy
Fitch conducted a file review of 20 sample loan files focusing on the underwriting procedures conducted by HCS compared with HCS's credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information, and no substantial discrepancies were noted that would have an impact on Fitch's rating analysis.

Fitch reviewed the results of the agreed-upon procedures (AUP) conducted on the portfolio; the AUP checked key eligibility criteria matching with the selected samples provided to Fitch for its rating analysis, and reported no significant errors that would affect Fitch's rating analysis.