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Announcement:

Moody's reviews for possible upgrade fleet lease securitization of Wheels Inc.

13 Dec 2010

Approximately $29.6 million of asset backed securities affected

New York, December 13, 2010 -- Moody's Investors Service has placed the subordinated classes of the Wheels SPV series 2009-1 floating rate asset backed notes on review for possible upgrade. The notes were issued by Wheels SPV, LLC, a bankruptcy-remote special purpose entity wholly owned by Wheels Inc.(Wheels), a fleet lease and management company.

Issuer: Wheels SPV LLC, Series 2009-1

Cl. B, Aa2 (sf) Placed Under Review for Possible Upgrade; previously on Aug 14, 2009 Definitive Rating Assigned Aa2 (sf)

Cl. C, A1 (sf) Placed Under Review for Possible Upgrade; previously on Aug 14, 2009 Definitive Rating Assigned A1 (sf)

RATING RATIONALE

This transaction is structured as a static amortizing pool with three classes paid sequentially, supported by non-declining enhancement consisting of overcollateralization and a reserve account. With approximate 15 months of seasoning, the transaction is performing well, having 4 bp (as a % of original pool balance) in cumulative net losses to date. As a result of low losses, steady paydown and the non-declining enhancement, support available to the subordinate classes has grown significantly. Specifically, total credit enhancement to Class B and Class C is now 16.84% and 11.97% of the remaining pool balance, respectively, up from 9.00% and 7.00%, respectively, at closing.

During the review period, Moody's will fine-tune its analysis of how the increased credit enhancement benefits these classes, with attention to modeling, structural features and current obligor pool concentrations. The pool appears to be slightly more concentrated than at closing.

The notes are ultimately backed by a special unit of beneficial interest in a pool of all open-end leases and the related vehicles. The leases were originated by Wheels, which provides fleet leasing and fleet management services primarily to corporate clients throughout the United States.

The principal methodology used in rating the transaction is summarized below.

PRINCIPAL METHODOLOGY

As the majority of the underlying collateral consists of a pool of open-end leases (i.e. leases where the lessees are responsible for any residual value losses), the potential credit loss of this transaction is primarily driven by the default likelihood of the lessees, the recovery rate when a lessee defaults, and the diversity of the pool of lessees. An approach similar to that used in CDO transactions is used. The CDO approach hinges on the idea of using a 'hypothetical pool' to map the credit and loss characteristics of an actual pool and then employing a mathematical technique called binomial expansion to determine the expected loss of the bond to be rated. Using the binomial expansion technique, the probability of default of each possible scenario is calculated based on a mathematical formula, and the cashflow profile for each scenario is determined based on an assumed recovery rate. Then each cashflow scenario is fed into a liability model to determine the actual loss on the bond under each scenario, and the probability weighted loss or expected loss of the bond is determined. The expected loss of the bond is then compared with Moody's Idealized Cumulative Expected Loss Rates Table to determine a rating for the bond.

The hypothetical pool is characterized by a diversity score. The diversity score measures the diversity of the actual pool by mathematically converting the obligor concentrations of the actual pool into the number of equally-sized uncorrelated obligors which would represent the same credit risk as the actual pool. This process is summarized as follows. Each lessee is assigned its applicable industry category. Lessees in the same industry are assumed to be correlated with each other, while lessees in different industries are assumed to be independent. The number of lessees in the same industry is reduced to reflect the correlation among them. For example, when calculating the diversity score, six equal-sized lessees in the same industry are counted as three independent obligors, while six equal-sized lessees in six different industries are counted as six independent obligors. The size of the lessees is also accounted for by reducing the number of lessees with below average lessee size. In general, the higher the diversity score, the lower the collateral loss volatility will be and consequently, the lower the expected loss of a security, other factors being the same.

Each possible default scenario is determined by both the diversity score and the average probability of default of the pool. The weighted average probability of default of the pool is determined by the probability of default of each lessee or obligor, which is estimated using the actual lessees' credit ratings, if rated. For non-rated lessees, the average rating is assumed to be lower than that of the rated lessees. For example, if the average rating for the rated lessees is Baa3, we could assume a rating of Ba3 or lower as the average rating for the non-rated lessees. The estimated weighted average rating for the entire hypothetical pool is then used to estimate the probability of each default scenario.

The actual net loss on the bonds under each default scenario is determined taking into consideration of recoveries in case of default. When a lessee defaults, recoveries are obtained as the related leased vehicles are reprocessed and sold to repay the defaulted lease obligation. We conduct detailed recovery analyses based on the types of vehicles leased and various default scenarios for lessees. Based on those recovery analyses, we determine the ratings after considering the breakeven recovery rates for the different classes of notes at their associated credit enhancement levels.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

For more information please see www.moodys.com.

New York
Suilan Mo-Escowitz
Analyst
Structured Finance Group

New York
Michael McDermitt
VP - Senior Credit Officer
Structured Finance Group

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's reviews for possible upgrade fleet lease securitization of Wheels Inc.
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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