Fitch Rates ARI Fleet Lease Trust 2016-A

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings rates ARI Fleet Least Trust 2016-A (ARI FLT 2016-A) as follows:

--$204,000,000 class A-1 'F1+sf';

--$264,000,000 class A-2 'AAAsf' Outlook Stable;

--$87,685,000 class A-3 'AAAsf' Outlook Stable.

KEY RATING DRIVERS

Strong Credit-Quality Obligors: A majority of the pool (65.80%) is publicly rated by a nationally recognized statistical rating organization (NRSRO) with 43.77% of the pool carrying an investment-grade rating. The weighted average rating of the rated pool is 'BBB'. Fitch conservatively assumes 'B' for the unrated obligors.

Strong Portfolio Diversification: The portfolio remains well diversified. The top five obligors by lease balance represent 15.96% versus 14.35% in 2015-A; top industry concentrations are comparable at 11.52%.

Minimal Residual Risk: The 2016-A leases are all open-ended, meaning the lessees bear virtually all residual risk. Therefore, the trust is only exposed to wholesale market risk in the event of an obligor default. Even if default occurs, past vehicle dispositions have largely resulted in gains relative to book value.

Sufficient Credit Enhancement (CE): Initial hard CE (8.35%) is unchanged from the 2015-A transaction, and excess spread also declined. However, target CE increased to 14.85%. Total proposed CE is sufficient to support Fitch's stressed default and loss assumptions, consistent with the expected ratings of 'F1+sf'/'AAAsf'.

Low Delinquency and Loss History: ARI's historical managed portfolio and prior transactions' delinquency and loss experience are low, even during periods marked by elevated levels in other consumer and commercial asset classes.

Quality Origination, Underwriting and Servicing: Fitch believes ARI to be a capable originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.}

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and transaction fees, or decreases in recovery rates, 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 ARI FLT 2016-A to increased default levels and servicing fees, as well as lower recovery rates for the truck component of the collateral pool, over the life of the transaction. Fitch's analysis found that the transaction displays relatively little sensitivity to increased servicing fees and the oil and gas industry. In both cases, the notes showed rating sensitivity of only one rating category. The transaction shows significantly more sensitivity to higher default rates, which Fitch stressed by assuming all unrated obligors carry a 'CCC' rating.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from KPMG LLP. The third-party due diligence focused on comparing or recalculating certain information with respect to 150 receivables. Fitch considered this information in its analysis and the findings did not have an impact on our analysis/conclusions. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of this rating action commentary (RAC).

Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Feb. 11, 2016. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'ARI Fleet Lease Trust 2016-A - Appendix'. These R&Ws 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 June 12, 2015.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at www.fitchratings.com

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Criteria for Rating U.S. Auto Lease ABS (pub. 19 Oct 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872539

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Global Rating Criteria for CLOs and Corporate CDOs (pub. 12 Nov 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873664

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

ARI Fleet Lease Trust 2016-A -- Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=877725

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999957

ABS Due Diligence Form 15E 1https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=999957&flm_nm=15e_999957_1.pdf

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999957

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160224006562/en/

Fitch Ratings
Primary Analyst:
Thomas Kaiser, CPA, CFA, +1-312-368-3338
Associate Director
Fitch Ratings Inc.
70 West Madison
Chicago, IL 60602
or
Secondary Analyst:
Cole Mackenzie, +1-212-908-0830
Associate Analyst
or
Committee Chairperson:
Du Trieu, +1-312-368-2091
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Changes to full-year guidance for BioMar
• InduPro Closes $77 Million Series B Financing and Doses First Patient in Phase 1 Study of Lead Oncology Program IDP-001
• Zoomcar to Announce Q1 FY26-27 Results on August 14, 2026