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12 Jul 2006
MOODY'S ASSIGNS DEFINITIVE RATINGS TO 2 CLASSES OF AUTO LEASE ABS ISSUED BY AUTO ABS COMPARTIMENT 2006-1
Euro 1.25 billion of Debt Securities Rated
Paris, July 12, 2006 -- Moody's Investors Service has assigned the following definitive ratings
to two classes of asset-backed notes issued by Auto ABS Compartiment
- Aaa to the Euro 1,118 million Class A Asset-Backed
Floating-Rate Notes due 25 July 2017;
- A2 to the Euro 132 million Class B Asset-Backed Floating-Rate
Notes due 25 July 2017;
Auto ABS Compartiment 2006-1 is the fourth transaction issued out
of Auto ABS Fonds Commun de Creances (FCC) established in June 2001.
The FCC is segregated in different compartments, each refinancing
different portfolios of assets originated by entities of the Peugeot SA
Compartiment 2006-1 is the first securitisation of lease receivables
and lease residual values in France making use of the new French Securitisation
framework on the validity and enforceability of transfer of future receivables
upon insolvency of the seller. The transaction includes a 3-year
revolving period. Credit enhancement is provided through excess
spread, subordination, a deferred purchase price mechanism
which allows for the adjustment of the credit enhancement to the evolution
of the characteristics of the portfolio, and an amortising reserve
fund of 2.2% at closing with a floor at 1% of the
nominal amount of the Notes.
The securitised receivables are originated by Credipar (A2), a financial
institution which is 99.99% owned by Banque PSA Finance
(A2/Prime-1), to private individuals and corporates in France
under different types of auto leasing contracts ("Contrats de Credits-Bails"
and "Contrats de Location assortis d'une promesse de vente"). Under
those contracts, the lessees benefit from an option to purchase
the vehicle at a predetermined price at the contract maturity or earlier
and from dealers buy-back agreements for part of them. Leased
vehicles are Peugeot and Citroen new tourist cars and new utility vehicles.
The transaction also involves receivables arising under car sale contracts
in the event that the relevant debtors do not exercise their purchase
The transaction funds the discounted amount of the monthly lease payments
to the maturity of the contract as well as for the option value (residual
value) at the contract maturity.
According to Moody's, the ratings take account of the following
factors, among others:
In addition to the lessees' credit risk, the leasing contracts originated
by Credipar give rise to specific risks as the assets transferred to the
FCC are future receivables both under the rental part of the lease contract
and under the exercise of the purchase option, or the car sale in
case the purchase option is not exercised. In addition, the
receivables do not benefit from any security on the vehicles as Credipar
will remain the owner of the vehicles.
The FCC is therefore exposed to the risk of an early termination of the
contracts, which would prevent the future receivables to arise.
This risk is mainly mitigated by the fact that the contracts may be early
terminated only upon request of the lessees, who would then have
to prepay the outstanding amount of the contract and would possibly be
charged an indemnity. Apart from this case, the early termination
would result from Credipar's default under one of its obligations,
which is very unlikely as Credipar has no obligation under the contract
other than the delivery of the vehicle (part of the eligibility criteria).
Even in the event of Credipar's bankruptcy, Moody's believes that
such risk is remote as it is likely that the bankruptcy plan would result
in a continuation plan given the size, market share and strong relationship
between Credipar and the PSA group. Moreover, the transaction
includes structural features that provide the originator, as the
owner of the vehicles, with strong incentives to sell the vehicles
in good condition for the benefit of the FCC. Indeed, Credipar
still benefits from the excess spread of the transaction and has strong
servicing covenants in this respect.
The residual value risk is mitigated by the three following points:
Firstly, the lessees have strong incentives to exercise the purchase
option or to transfer it to the dealers under the buy back agreements,
explaining the above 99% of options exercised historically.
Secondly, a dynamic credit enhancement has been structured to adjust
the credit support to the evolution of the portfolio breakdown per type
of contract (contracts with low or high residual value, contracts
with early purchase option). Finally, Moody's has sized the
required credit enhancement in different debtors credit risk and residual
value scenarios, including scenarios combining a low percentage
of options exercised and stressed vehicle sale prices.
The structure includes a commingling reserve fund. Indeed,
lessees will continue to pay to a Credipar account and will not be notified
to pay to a FCC account before the bankruptcy of Credipar, which
may result in a loss of collections. Given that the VAT portion
of the future receivables is funded, the structure also includes
a VAT reserve fund. This reserve has been sized to cover for a
decrease of the VAT rate from 19.5% down to 15% (a
lower rate scenario was thought as being unlikely given the EU framework).
In addition, Credipar is committed to cover for any loss resulting
from such a scenario. Both the commingling and the VAT reserves
will be funded by Credipar if Credipar's rating is downgraded below Baa2.
The ratings address the expected loss posed to investors by the legal
final maturity of the notes. In Moody's opinion, the structure
allows for timely payment of interest and ultimate payment of principal
with respect to the Notes by the legal final maturity. Moody's
ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
To obtain a copy of Moody's New Issue Report on this transaction,
please visit Moody's website at www.moodys.com or contact
our Client Service Desk in London (+44-20-7772 5454).
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Asst Vice President - Analyst
Structured Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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