Business Wire

Fitch Rates Chrysler Capital Auto Receivables Trust 2016-B; Outlook Stable

Friday, Nov 04, 2016

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings to Chrysler Capital Auto Receivables Trust (CCART) 2016-B:

--$168,000,000 class A-1 asset-backed notes 'F1+sf';

--$260,000,000 class A-2 asset-backed notes 'AAAsf'; Outlook Stable;

--$220,000,000 class A-3 asset-backed notes 'AAAsf'; Outlook Stable;

--$82,030,000 class A-4 asset-backed notes 'AAAsf'; Outlook Stable;

--$29,380,000 class B asset-backed notes 'AAsf'; Outlook Stable;

--$47,460,000 class C asset-backed notes 'Asf'; Outlook Stable;

--$33,910,000 class D asset-backed notes 'BBBsf'; Outlook Stable.

KEY RATING DRIVERS

Limited Performance History: Chrysler Capital (CC) was founded in 2013; thus, performance data are limited and were not utilized by Fitch to determine the base case loss proxy. Fitch utilized conservative 2006 - 2008 vintage securitization loss data from the DaimlerChrysler Auto Trust (DCAT) platform to derive a loss proxy for this portion of the pool. The loss proxy has increased relative to 2016-A due to weaker performance observed on outstanding CCART transactions.

Performance Weakening: The Santander Consumer USA Inc. (SC) and CC portfolios, along with CCART securitizations, recorded rising delinquencies and cumulative net losses (CNL) year-over-year (YoY) through 2015 and the second quarter of 2016. Fitch took this into account when deriving the 2016-B proxy. CCART pools have certain prime borrower characteristics, but Fitch classifies the platform as midprime based on historical loss performance to date and, thus, applied midprime loss multiples in its analysis.

Stable CC/SC Receivables Mix: CC originations total 88% of the pool, while core SC nonprime originations total 12%, consistent with recent pools. Fitch utilized conservative nonprime core SC loss data to derive a loss proxy for the core SC portion of the pool.

Sufficient Credit Enhancement (CE): Initial hard CE totals 19.5% for the class A notes, down from 20.0% in 2016-A. CE for the class B through D notes is also marginally lower versus 2016-A. Excess spread is 4.89%, consistent with 2016-A. CE is sufficient to cover Fitch's 5.50% base case proxy and modeled net loss levels for all the notes.

Consistent Collateral Pool: The collateral is fairly consistent with prior pools. The weighted average (WA) FICO score is 712, WA loan-to-value (LTV) is 106% and new vehicles total 73.3%. Commercial contracts, which typically perform stronger than retails contracts, total 9.0% of the pool. The pool's collateral characteristics comprise elements of prime and nonprime consumer credits.

Increasing Extended-Term Loans: Loans with terms of 60-plus months total 80.8%, down from 2016-A and prior transactions. However, 73 to 75 month contracts total 21.6% of the pool, the highest level observed to date for the platform. Fitch applied a stress to the loss proxy to account for the risk posed by these loans due to limited performance history and weaker loan attributes and credit quality.

Stable Corporate Health: SC has been profitable each year since 2007, including recent years. Fitch rates Santander, majority owner of SC via Santander Holding USA, Inc. (SHUSA), 'A-/F2'/Stable Outlook.

Consistent Origination/Underwriting/Servicing: Along with its CC division, SC demonstrates adequate abilities as originator, underwriter and servicer, as evidenced by historical portfolio and securitization performance. Fitch deems SC capable to service this series.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of SC 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 2016-B 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. We saw a potential downgrade of one category under Fitch's moderate (1.5x base case loss) scenario, especially for the subordinate bonds. The notes could experience downgrades of up to two rating categories, potentially leading to distressed ratings, under Fitch's severe (2x 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 re-computing certain information with respect to 145 retail and 30 commercial receivables from the statistical data file. Fitch considered this information in its analysis, and the findings did not have an impact on the 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 the related rating action commentary.

Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled 'Chrysler Capital Auto Receivables Asset Trust 2016-B -- 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 May 31, 2016.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

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

https://www.fitchratings.com/site/re/878723

Related Research

Chrysler Capital Auto Receivables Trust 2016-B - Appendix

https://www.fitchratings.com/site/re/889406

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014369

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1014369&flm_nm=15e_1014369_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014369

Endorsement Policy

https://www.fitchratings.com/regulatory

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