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Fitch Expects to Rate Avis Budget Rental Funding (AESOP) LLC, Series 2017-1; Presale Issued
March 3, 2017 / 2:12 PM / 9 months ago

Fitch Expects to Rate Avis Budget Rental Funding (AESOP) LLC, Series 2017-1; Presale Issued

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Avis Budget Rental Funding LLC, Series 2017-1 here NEW YORK, March 03 (Fitch) Fitch Ratings expects to assign the following ratings and Outlooks to the notes issued by Avis Budget Rental Funding (AESOP) LLC, 2017-1 (AESOP 2017-1): --$401,080,000 class A notes 'AAAsf'; Outlook Stable; --$58,650,000 class B notes 'Asf'; Outlook Stable; --$40,270,000 class C notes 'BBBsf'; Outlook Stable. KEY RATING DRIVERS High Fleet Diversity: AESOP is deemed diverse due to the high degree of original equipment manufacturers (OEM), model, segment and geographic diversification in the fleet. Concentration limits, based on a number of characteristics, help mitigate the risk of OEM defaults and losses. Healthy OEM Financials: OEMs with program vehicle (PV) concentrations in the fleet have all improved their financial positions in recent years, putting themselves in position to meet program agreement obligations. Ford ('BBB'/Outlook Stable) is the largest OEM in the total fleet (30.3%) with PV-specific vehicles (17.4%). Stable Depreciation and Residual Realization: Depreciation has been relatively stable largely due to consistent aging within the fleet, which typically ranges from seven to nine months. Vehicle disposition losses have been minimal for PV, and risk vehicles have consistently shown residual gains relative to net book value at sale. Sufficient Enhancement: Credit enhancement (CE) for the notes is composed of subordination, letter(s) of credit and dynamic overcollateralization, which will shift according to the fleet mix. CE levels for each class of notes are sufficient to cover Fitch's maximum and minimum expected loss levels for each class under the respective ratings. Structural Feature Mitigate Risk: Market value tests, amortization triggers and events of default all mitigate risks stemming from ongoing vehicle value volatility and weakness, ensuring parity between vehicle net book values and market values. Adequate Servicer and Fleet Manager: Avis Budget Car Rental, LLC is deemed an adequate servicer and administrator as evidenced by its fleet management abilities and securitization performance to date. Fiserv is backup disposition agent, while Lord Securities is the backup administrator, both well experienced in their respective roles. Integrity of Legal Structure: The legal structure of AESOP provides that a bankruptcy of Avis Budget Group, Inc. or its subsidiaries would not impair the timeliness of payments on the securities. RATING SENSITIVITIES Fitch's rating sensitivity analysis focuses on three scenarios involving potentially extreme market disruptions that would force the agency to redefine its stress assumptions. The first examines the effect of moving Fitch's bankruptcy/liquidation timing scenario to eight months at 'AAAsf' with subsequent increases to each rating level. The second considers the effect of moving the disposition stresses to the higher end of the range at each rating level for a diverse fleet. For example, at 'AAAsf', the stress would move from 24% to 28%. Finally, the last example shows the impact of both stresses on the structure. The purpose of these stresses is to demonstrate the potential rating impact on a transaction if one or a combination of these scenarios occurs. Fitch determined ratings by applying expected loss levels for various rating categories until the enhancement proposed exceeds the expected loss levels from the sensitivity. The expected loss levels outlined in the tables below are representative of expected levels at each rating level. Fitch ran sensitivities on the structure according to the scenarios described above. For all sensitivity scenarios, the class A notes show little sensitivity to changes in the assumptions, with a potential downgrade only occurring under the combined scenario. The class B notes could see a one category downgrade under the combined scenario but would otherwise remain at the current rating category. Class C notes, as the most subordinate class, are the most sensitive to changes in losses and could see a one notch downgrade in the disposition loss scenario and a category downgrade to 'BB' in the combined scenario. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Fitch was provided with third-party due diligence information from Deloitte & Touche LLP in the form of their Independent Accountants Report on Applying Agreed-Upon Procedures pertaining to each series. The third-party due diligence focused on a review of the procedures and related data for approximately 365 vehicles in the pool for each series. Fitch considered this information in its analysis, but the findings had no impact on Fitch's analysis. 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 accessing the appendix referenced under 'Related Research' below. 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,' dated March 2, 2017. Contacts: Primary Analyst Timothy McNally Associate Director +1-212-908-0870 Fitch Ratings, Inc. 33 Whitehall Street, New York, NY 10004 Secondary Analyst Hylton Heard Director +1-212-908-0214 Committee Chairperson Du Trieu Senior Director +1-312-368-2091 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: Additional information is available on Applicable Criteria Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016) here Global Rating Criteria for Rental Fleet ABS (pub. 31 Aug 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Related Research Avis Budget Rental Funding (AESOP) LLC, Series 2017-1 -- Appendix here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020003 ABS Due Diligence Form 15E 1 here ?pr_id=1020003&flm_nm=15e_1020003_1.pdf Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT 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. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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