Fitch to Rate Capital Auto Receivables Asset Trust 2015-3; Presale Issued

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign the following ratings to the notes issued by Capital Auto Receivables Asset Trust 2015-3:

--$328,000,000 class A-1 notes 'AAAsf'; Outlook Stable;

--$227,000,000 class A-2 notes 'AAAsf'; Outlook Stable;

--$227,000,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$86,640,000 class A-4 notes 'AAAsf'; Outlook Stable;

--$50,940,000 class B notes 'AAsf'; Outlook Stable;

--$48,260,000 class C notes 'Asf'; Outlook Stable;

--$42,900,000 class D notes 'BBBsf'; Outlook Stable;

--$53,620,000 class E notes 'BB-sf'; Outlook Stable.

KEY RATING DRIVERS

Stable Collateral Characteristics: The 2015-3 pool is representative of nonprime collateral, with a 633 weighted average (WA) Fair Isaac Corp. (FICO) score, 8.80% WA APR and 105% WA loan-to-value (LTV) ratio. Of the pool, 60% consists of new vehicle contracts, while extended-term contracts total 77.0%, all relatively consistent with recent securitized pools.

One-Year Revolving Period Risk: The revolving structure introduces risk of collateral migrating to a weaker pool before the start of the amortization period, although eligibility criteria pertaining to the additional receivables may mitigate some of this risk. Fitch accounts for collateral migration in its derivation of the base case loss proxy for 2015-3.

Adequate Credit Enhancement: Initial hard credit enhancement (CE) for class A notes totals 19.50%. The non-declining reserve is 0.50%, subordination totals 18.25% and initial overcollateralization (OC) is 0.75%, growing to a target of 2.25% after the revolving period. The expected excess spread totals 5.06% per annum.

Stable Portfolio Performance: AFIN's nonprime auto loan portfolio performance has improved relative to the weak 2006 - 2008 period, given the gradual improvements in the U.S. economy and health of the used vehicle market. Fitch's base case loss proxy for 2015-3 is 5.50%. However, Fitch's current CNL extrapolations for outstanding CARAT transactions which have begun to amortize is 3.00% to 3.50%.

Stable Corporate Health: Fitch currently rates AFIN 'BB+/B'/Stable. AFIN demonstrates solid capabilities as an originator, underwriter and servicer, as evidenced by its historical prime and nonprime portfolios and securitization performance.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of AFIN 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. This in turn could result in Fitch taking negative rating actions on the notes.

Fitch evaluated the sensitivity of the ratings assigned to Santander Drive Auto Receivables Trust 2015-4 to increased credit losses over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and credit losses. This shows a potential downgrade of one or two categories under Fitch's moderate (1.5x base case loss) scenario, especially for the subordinate bonds. The notes could experience downgrades of three or more rating categories, potentially leading to distressed ratings (below 'Bsf') or possibly default, under Fitch's severe (2.5x base case loss) scenario.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence focused on comparing or recomputing certain information with respect to 225 loans from the statistical data file. We considered this information in our analysis, and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link at the bottom of this rating action commentary (RAC).

Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled 'Capital Auto Receivables Asset Trust 2015-3 -- 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 March 26, 2015.

Additional information is available at www.fitchratings.com.

Capital Auto Receivables Asset Trust 2015-3 (US ABS)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869441

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

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for U.S. Auto Loan ABS (pub. 10 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863979

Related Research

Capital Auto Receivables Asset Trust 2015-3 Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869493

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989109

ABS Due Diligence Form 15E

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=989109&flm_nm=15e_989109_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989109

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/20150806006110/en/

Fitch Ratings
Primary Analyst
Timothy McNally
Associate Director
+1-212-908-0870
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Hylton Heard
Senior Director
+1-212-908-0870
or
Committee Chairperson
John Bella
Managing Director
+1-212-908-0243
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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