BMW AG
Fitch Ratings has assigned
The Outlook is Stable.
The assignment of final rating is contingent on the receipt of final documents conforming to information already reviewed.
RATING ACTIONS
Entity / Debt
Rating
Class A
LT
Expected Rating
Class B
LT
NR(EXP)sf
Expected Rating
Subordinated Loan
LT
NR(EXP)sf
Expected Rating
Page
of 1
VIEW ADDITIONAL RATING DETAILS
Transaction Summary
The transaction is a revolving securitisation of German auto lease receivables originated by
KEY RATING DRIVERS
Macroeconomic Risks: Fitch has assigned a 1.3% default base case, slightly lower than the previous issuance Bavarian Sky Leases 6. The base case acknowledges the stronger-than-expected performance of predecessor transactions but still incorporates Fitch's expectations that performance may moderately deteriorate. This considers the rising inflation in
Only After-sale Recoveries Available: The transaction is structured so that the issuer will not benefit from vehicle sale proceeds on defaulted lease receivables, but will only be entitled to unsecured recoveries based on the lease receivables' pro-rata share or monies from bad debt sales. Fitch derived a recovery base case of 10% using a mix of proxy market data, performance data of a predecessor transaction and
Revolving Period Impact Limited: The transaction will feature a one-year revolving period. The period is fairly short, which combined with the random asset selection and the homogeneity of the portfolio, limits the potential migration towards a higher-risk pool composition. This is despite the absence of meaningful concentration limits. Performance deterioration is most effectively limited via an asset-liability test. If the performing asset balance is below the class A and B notes balance, the revolving period will end.
Turbo Amortisation Accelerates CE Build-up: All available funds of the payment waterfall, after paying senior costs, swap and interest payments and the reserve-fund refill, are allocated after the end of the revolving period to pay down the class A notes until they are redeemed in full. This mechanism leads to faster build-up of credit enhancement (CE) via over-collateralisation than in comparable transactions, where notes often only amortise to a target balance.
Servicer Continuity Assured: No back-up servicer will be named at closing, but Fitch deems servicer discontinuity risk to be reduced by the appointment of a back-up servicer facilitator, the standard nature of the assets and the availability of liquidity for a replacement period through a non-amortising reserve fund. The latter can cover the issuer's senior expenses for approximately four months.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Unanticipated increases in the frequency of defaults or decreases in recovery rates could produce larger losses than the base case and could result in negative rating action on the notes. For example, an increase of the default base case by 25% would lead to a model-implied downgrade of the class A notes of no more than one notch.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The notes are rated at the highest possible rating and therefore cannot be upgraded.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
DATA ADEQUACY
Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis.
Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
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