Fitch Rates Volvo Financial Equipment LLC, Series 2015-1

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings expects to rate Volvo Financial Equipment LLC, Series 2015-1 as follows:

--$196,000,000 class A-1 notes 'F1+sf';

--$240,000,000 class A-2 notes 'AAAsf'; Outlook Stable;

--$262,000,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$72,770,000 class A-4 notes 'AAAsf'; Outlook Stable;

--$18,950,000 class B notes 'AAsf'; Outlook Stable;

--$26,530,000 class C notes 'Asf'; Outlook Stable;

--$26,122,168 certificates 'NR'.

Fitch's stress and rating sensitivity analysis are discussed in the presale report titled 'Volvo Financial Equipment LLC, Series 2015-1', dated March 5, 2015, which is available at 'www.fitchratings.com' or by clicking on the link below.

KEY RATING DRIVERS

Consistent Collateral: The 2015-1 pool consists of 82.91% trucking collateral and 17.09% of construction (CO) collateral. Of the pool, 12.88% is composed of dealer term loans (DTLs), which have not experienced credit defaults on the managed portfolio or prior securitizations.

Improved Managed Portfolio Performance: VFS' managed transportation portfolio experienced asset deterioration from 2007-2009. However, performance between 2010 and 2014 exhibited improvement in delinquencies and losses.

Strong Securitization Performance: The prior transactions have been performing well. Forecasts of cumulative net losses (CNL) on the outstanding securitizations are extrapolating below 1.00%.

Sufficient Credit Enhancement: Hard credit enhancement (CE) is 9.25%, 7.00% and 3.85% for the class A, B and C notes, respectively. Additionally, the notes benefit from excess spread, expected to be 2.50% per annum. CE levels are sufficient for the ratings under Fitch's 2.50% CNL proxy.

Stable Origination, Underwriting and Servicing Platform: VFS has demonstrated sufficient abilities as originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.

Integrity of Legal Structure: The legal structure of the transaction should provide that a bankruptcy of the trust would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to VFET 2015-1 to increased CNLs over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and CNL, showing a potential downgrade of one category under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to three rating categories, although still remain investment grade, under Fitch's severe (2.5x base case loss) scenario.

Key Rating Drivers and Rating Sensitivities are further described in the pre-sale report issued of March 5, 2015.

Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Volvo Financial Equipment LLC, Series 2015-1 - Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated Oct. 31, 2014.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Criteria for Rating U.S. Equipment Lease and Loan ABS' (Dec. 23, 2014);

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds' (Dec. 19, 2014);

--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (Oct. 31, 2014);

--'Volvo Financial Equipment LLC, Series 2015-1' (March 5, 2015);

--'Volvo Financial Equipment LLC, Series 2015-1 - Appendix' (March 5, 2015).

Applicable Criteria and Related Research:

Criteria for Rating U.S. Equipment Lease and Loan ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=830328

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=799248

Volvo Financial Equipment LLC, Series 2015-1 (US ABS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863226

Volvo Financial Equipment LLC, Series 2015-1 -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863287

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981532

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst:
Du Trieu, +1-312-368-2091
Senior Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst:
Peter Manofsky, +1-312-368-2068
Director
or
Committee Chairperson:
Bradley Sohl, +1-212-908-0792
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
[email protected]

Source: Fitch Ratings

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