Fitch Rates BMW Vehicle Owner Trust 2016-A

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assign the following ratings to the BMW Vehicle Owner Trust 2016-A (BMWOT 2016-A) notes:

--$329,000,000 class A-1 'F1+sf';

--$325,000,000 class A-2a 'AAAsf'; Outlook Stable;

--$125,000,000 class A-2b 'AAAsf'; Outlook Stable;

--$356,000,000 class A-3 'AAAsf'; Outlook Stable;

--$115,000,000 class A-4 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

Strong Collateral Quality: The weighted average (WA) Fair Isaac Corp. (FICO) score of 763 is consistent with prior BMWOT pools and indicates strong borrower credit quality. Extended-term contracts and certified pre-owned (CPO) collateral have slightly decreased from the prior transaction.

Sufficient Credit Enhancement: 2016-A incorporates a sequential-pay structure. Total initial hard credit enhancement (CE) in 2016-A for class A notes is 2.75% (overcollateralization [OC] of 2.50% plus a 0.25% initial reserve), consistent with 2014-A. Yield supplement OC will be used to boost the transaction's annual percentage rate (APR), providing expected excess spread of 3.34%. Hard CE is sufficient to cover Fitch's 'AAAsf' stressed loss expectation.

Strong Portfolio/Securitization Performance: BMWFS's securitizations and serviced portfolio have experienced stable delinquency and loss performance over the past few years following peak levels recorded during the recent recession (2008-2010).

Evolving Wholesale Market: The U.S. wholesale vehicle market is normalizing following strong performance in recent years. Fitch expects increasing used vehicle supply from off-lease vehicles and trade-ins to pressure ABS recovery rates, leading to moderately higher loss rates. Fitch's analysis accounts for this risk by including periods of weak wholesale vehicle market performance in the derivation of its base case loss expectation.

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

Stable Origination/Underwriting/Servicing: Fitch believes BMWFS is a capable originator, underwriter, and servicer for prime auto loan collateral as evidenced by the historical delinquency and loss performance of its securitizations and managed portfolio.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn could result in potential negative rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to BMWOT 2016-A to increased losses over the life of the transaction. Fitch's analysis found that the class A notes display minimal sensitivity to a moderate increase in defaults and losses, under Fitch's moderate (1.5x base case loss) scenario. However, class A notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.

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 140 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 the related rating action commentary.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879815

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 Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Rating Criteria for U.S. Auto Loan ABS (pub. 21 Mar 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878723

Related Research

BMW Vehicle Owner Trust 2016-A -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884700

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009177

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1009177&flm_nm=15e_1009177_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009177

Endorsement Policy

https://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/20160720006026/en/

Fitch Ratings
Primary Analyst
Joyce Fargas
Director
+1-212-908-0824
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Brian Coffey
Associate Director
+1-212-908-0399
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0214
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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