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Rating Action:

MOODY'S ASSIGNS PROVISIONAL NATIONAL SCALE RATINGS TO SOUTH AFRICAN AUTO ABS NOTES TO BE ISSUED UNDER DOMESTIC MEDIUM TERM NOTE PROGRAMME AUTO SERIES INVESTMENTS LIMITED

18 Mar 2005
MOODY'S ASSIGNS PROVISIONAL NATIONAL SCALE RATINGS TO SOUTH AFRICAN AUTO ABS NOTES TO BE ISSUED UNDER DOMESTIC MEDIUM TERM NOTE PROGRAMME AUTO SERIES INVESTMENTS LIMITED

Approximately ZAR 1.4 Billion of Debt Securities Affected.

Johannesburg, March 18, 2005 -- Moody's Investors Service has assigned the following provisional National Scale Ratings ("NSR") to the debt issuance of Auto Series Investments Limited ("the Issuer"):

- (P)Aaa.za to ZAR 160,000,000 Class AS0507 Secured Floating Rate Notes due 12 April 2025,

- (P)Aaa.za to ZAR 150,000,000 Class AS0510 Secured Floating Rate Notes due 12 April 2025,

- (P)Aaa.za to ZAR 130,000,000 Class AS0601 Secured Floating Rate Notes due 12 April 2025,

- (P)Aaa.za to ZAR 110,000,000 Class AS0604 Secured Floating Rate Notes due 12 April 2025,

- (P)Aaa.za to ZAR 190,000,000 Class AS0610 Secured Floating Rate Notes due 12 April 2025,

- (P)Aaa.za to ZAR 180,000,000 Class AS0704 Secured Floating Rate Notes due 12 April 2025,

- (P)Aaa.za to ZAR 200,000,000 Class AS0710 Secured Floating Rate Notes due 12 April 2025,

- (P)Aaa.za to ZAR 110,000,000 Class AS0804 Secured Floating Rate Notes due 12 April 2025, and

- (P)Aaa.za to ZAR 170,000,000 Class AS0810 Secured Floating Rate Notes due 12 April 2025

This is the fifth public term securitisation of BMW Financial Services (South Africa) Proprietary ("BMW FS"). This transaction will benefit from the same structural features as the most recent Auto Loan Investments transaction (which, as with prior transactions, was structured as a single issuer), with some additional changes which have been made in order to establish a domestic medium term note programme structure. Moody's believes that these changes do not introduce any incremental credit risk to investors.

BMW FS sells to the Issuer loan and lease receivables which relate to financing of new and used BMW and non-BMW vehicles and have been originated in the ordinary course of business. The Issuer finances the acquisition of the initial receivables through the issuance of nine tranches in an initial aggregate amount of ZAR 1,400,000,000 to investors in the South African capital markets. The transaction also provides for the possibility of further Notes issuance under a domestic medium term note programme, subject to the availability of further eligible receivables and confirmations by the Security SPV and Moody's that this will not negatively affect the rating of the Notes outstanding. All Notes issued under the domestic medium term note programme will rank pari passu amongst themselves as well as with any existing Notes.

Notes have legal final maturity dates that coincide with the programme maturity date. In addition, each individual note has a different target maturity date corresponding to its anticipated redemption date, which has been determined according to the expected prepayment profile of the assets. To the extent that prepayments are lower than anticipated and proceeds from the assets are insufficient to redeem any tranche of Notes at its target maturity date, the issuer may draw on a Note specific liquidity facility or may use the proceeds from refinancing Notes to redeem the relevant Notes. Each Note specific liquidity facility will be sized in an amount equal to the principal amount outstanding of the relevant tranche of Notes on its target maturity date, and will only be available on that date. All Note specific liquidity facilities will be cancelled upon the occurrence of either a put option trigger event or an event of default and rank in the priority of payments in such a way so as not to constitute credit enhancement to the Notes. Moody's has not rated the Notes to their target maturity dates, but rather to the legal final maturity.

The credit enhancement for the notes is provided through (i) a put option under which the Issuer can put irrecoverable assets to Rand Merchant Bank, a division of FirstRand Bank Limited, (Baa1/Prime-2/C)* (Aa2.za/Prime-1.za)** for a total amount of ZAR 119,000,000 (equivalent to 8.5%), (ii) a 1% over collateralisation, and (iii) a ZAR 1.2m (0.08%) reserve fund built up from excess spread.

The portfolio as of the preliminary pool cut date includes auto financing to 6,227 retail customers, with an average balance of ZAR 227,198. The majority of the vehicles are BMWs (84%). The weighted average seasoning of the pool is 7.1 months and most of the obligors live in Gauteng (60%). The number of balloon loans included in the portfolio has increased sizeably as compared to previous transactions. 15% of the total portfolio value consists of a 65% residual value product, not seen in previous transactions. The 65% residual value product has the additional features of (i) a 65% guaranteed buy-back offered by the dealership to the obligor at maturity; and (ii) a 50% guaranteed buy-back offered by BMW FS to the dealership at maturity, where both (i) and (ii) are subject to certain restrictions related to the condition and mileage of the vehicles. Since there is at most 18 months of data available on these higher residual value loans, Moody's has made conservative recovery assumptions in its modelling.

The ratings are based on the following positive and less favourable aspects of the transaction.

Positive features, inter alia, include: (1) Auto Series Investments is the fifth securitisation of auto loans and auto leases originated by BMW FS. Previous Auto Loan Investment transactions are performing in line with expectations; (2) All loans and leases are required to be current at the effective date, as per the eligibility criteria; (3) BMW FS has provided detailed historical arrears, default and recovery data; however, only 18 months of data was provided for loans with residual values exceeding 50%. Default information was provided on a static basis grouped into monthly cohorts. The data underlined a steadily improving performance linked to the introduction of new management, new underwriting and collection guidelines and procedures in 1998; (4) The credit enhancement available over time to the Notes comes from (i) a put option between the issuer and RMB in the amount of ZAR 119 million, (ii) through capture of excess spread of up to ZAR 1.2 million into an issuer account and (iii), 1% purchase price discount, resulting in ZAR 14 million initial over collateralisation; (5) The transaction benefits from a ZAR 35 million programme wide liquidity facility provided by RMB, which is available to cover shortfalls in payments with respect to senior fees and interest on the Notes throughout the life of the transaction; (6) Moody's has reviewed BMW FS operations and believes that management, procedures and systems permit BMW FS to act as servicer under this transaction.

Less favourable aspects, amongst others, include: (1) There are interest rate mismatches between the Prime rate received under the loans and leases and the Jibar Rate paid under the Notes. In order to mitigate this interest rate risk, the issuer enters into a basis swap with RMB on closing of the transaction; (2) Although losses in the portfolio which exceed the put option amount plus trapped excess spread and over collateralisation are allocated pari passu and pro rata on the Notes, the principal repayment on the Notes is done in full sequential order prior to the occurrence of a put option trigger event or event of default. Therefore the longest outstanding class of Notes will have a higher expected loss relative to other Notes. This is partly mitigated by the inclusion of a switch to pro rata trigger upon the occurrence of a put option trigger event; (3) In the late 1990s, BMW experienced in its total portfolio high loss levels and a rather high volatility. The performance has improved from this period onward, as pointed out above. Furthermore, Moody's decided to exclude the high losses in 1998 from the determination of the expected cumulative loss for the securitised pool. The volatility assumption applied in the determination of the lognormal distribution, however, was stressed to take the whole spectrum into account; (4) About one fifth of the total portfolio value is made up by loans with balloon payments in excess of 50%, for which only limited historical data is available. This introduces uncertainty as to the extent of future losses on these types of products. Moody's has made conservative assumptions with regard to expected recoveries on high residual value products.

The provisional 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 at par on or before the rated final legal maturity date. Moody's issues provisional ratings in advance of the final sale of securities, but these ratings represent only Moody's preliminary credit opinions. Upon a conclusive review of the transaction and associated documentation, Moody's will endeavour to assign definitive ratings to the Notes. A definitive rating may differ from a provisional rating.

To obtain a copy of the Pre-Sale Report please contact Moody's Client Service Desk in London at +44 (0) 20 7772 5454 or visit our website at www.moodys.com.

Note:

* The ratings indicated are foreign currency bank deposit Global Scale Ratings.

** The ratings indicated are National Scale Ratings.

Reynold Leegerstee
General Manager
Structured Finance Group

Anthea Heap
Senior Associate
Structured Finance Group

No Related Data.
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