Fitch Ratings has affirmed two classes of notes from Eclipx Turbo Series 2017-1 Trust's automotive lease-backed floating-rate notes.
The transactions are securitisations of first-ranking Australian operating, financing and novated lease receivables originated by
The social and market disruption caused by the coronavirus and the related containment measures did not negatively affect the ratings because there is sufficient credit enhancement to offset the effects under Fitch's base-case scenario and adequate liquidity to support the current ratings.
The Stable Outlook is based on the notes' liquidity support and ability to withstand the sensitivity to higher defaults and lower recoveries stemming from the pandemic.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
Eclipx Turbo Series 2017-1 Trust
A2 AU3FN0039343
LT AAAsf Affirmed AAAsf
B AU3FN0039350
LT AAAsf Affirmed AAAsf
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Coronavirus-Related Economic Shock: Fitch has made assumptions about the spread of the coronavirus and the economic impact of the related containment measures. Under our base-case (most likely) scenario, Fitch assumes a global recession in 1H20 driven by sharp economic contractions in major economies with a rapid spike in unemployment, followed by a solid recovery that begins in 3Q20 as the health crisis subsides. Fitch's baseline scenario for
Coronavirus-Related Impact: The measures put in place to limit the virus spread are affecting
Commentary describing our credit views and analytical approach as a consequence of the coronavirus is available in the following reports:
'Global Economic Outlook:
'Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases-Update', available at www.fitchratings.com/site/re/10120570
'Global SF Rating Assumptions Updated to Reflect Coronavirus Risk', available at www.fitchratings.com/site/pr/10117224
Liquidity Risk: We have reviewed the ability of the transaction to survive a significant proportion of borrowers being offered, and taking up, a payment holiday. The transaction can withstand more than 95% of the portfolio in delinquency or receiving payment holidays before needing to draw upon liquidity support. This is well above the current balance of loans under payment deferral as a portion of the total transaction (0.6% at
Portfolio Analysis: The portfolio consisted of 3,197 contracts equating to approximately AUD79.8 million at
The portfolio has exhibited no signs of performance deterioration; as at
Fitch took into consideration the historical performance of the portfolio in reviewing the base-case assumptions, as well as expectations of the performance of the receivables as a result of the deterioration of macroeconomic conditions in
Obligor Concentration: The pool's largest 10 obligors account for 4.2% of the current portfolio. The relative concentration of the portfolio has been taken into consideration in Fitch's derivation of default assumptions while considering lessee concentrations and correlation risks, in line with the SME Balance Sheet Securitisation Rating Criteria.
Residual Value Risk: The weighted-average current residual value on the operating lease portfolio is 50.34%. The proceeds realised on disposal of the underlying assets have been stable in the last 12 months and have exceeded the base-case assumptions set at the inception of the transaction. The performance of the residual value has been underpinned by stronger demand than we expected for second-hand cars.
Servicer, Operational Risks: All assets were originated by FleetPartners, which demonstrates adequate capability as originator, underwriter and servicer, evident from the historical delinquency and performance of existing securitised trusts. Fitch undertook an onsite operational review and found that the operations of the originator and servicer were comparable with other auto and equipment lenders.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The class A2 and B notes are rated at 'AAAsf', which is the highest level on Fitch's scale. The ratings cannot be upgraded.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A longer pandemic than Fitch expects that leads to deterioration in macroeconomic fundamentals and consumers' financial position in
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch 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 pools and the transactions. 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 as part of its ongoing monitoring.
As part of its ongoing monitoring, Fitch conducted a review of a small targeted sample of FleetPartners' 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 asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Additional information is available on www.fitchratings.com
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