Approximately $29.6 million of asset backed securities affected
New York, March 29, 2011 -- Moody's Investors Service has upgraded the two subordinated classes
of the Series 2009-1 floating rate asset backed notes (the Notes)
issued by Wheels SPV, LLC (the Issuer). The Issuer is a bankruptcy-remote
special purpose entity wholly owned by Wheels Inc. (Wheels),
a major fleet lease and management company providing fleet leasing and
fleet management services primarily to corporate clients throughout the
The notes are backed by a special unit of beneficial interest ("SUBI")
in a trust holding a static pool of open-end leases and the related
vehicles. The leases were originated by Wheels and include a diversified
mix of corporate lessees.
The complete rating action is as follows:
Issuer: Wheels SPV LLC
Cl. B, Upgraded to Aa1 (sf); previously on Dec 13,
2010 Aa2 (sf) Placed Under Review for Possible Upgrade
Cl. C, Upgraded to Aa3 (sf); previously on Dec 13,
2010 A1 (sf) Placed Under Review for Possible Upgrade
This transaction is structured as a static amortizing pool with three
classes paid sequentially, supported by partially declining enhancement
consisting of overcollateralization and a reserve account. The
reserve account was fully funded at closing and is non-declining.
Overcollateralization is 8% of the remaining pool balance with
a floor of 1.95% of initial pool balance. As of March
2011, with approximate 19 months of seasoning, the transaction
is performing well, having 13 bp (as a % of original pool
balance) in cumulative net losses to date. As a result of low losses
and steady paydown, the support available to the subordinate classes
has grown significantly. Specifically, total credit enhancement
to Class B and Class C is now 17.48% and 13.02%
of the remaining pool balance, respectively, up from 9.00%
and 7.00%, at closing.
During our recent review, Moody's received updated obligor
portfolio data as of January 31, 2011. The pool appears to
be slightly more concentrated than at closing. In our analysis,
we took that into account as well as the declining OC which will eventually
reach a floor of $14.4 million, 1.95%
of the initial aggregate securitization value.
The principal methodology used in rating the transaction is summarized
below. Other methodologies and factors that may have been considered
in the process of rating this issue can also be found at www.moodys.com
in the Ratings Methodologies subdirectory of the Credit Policy & Methodologies
The majority of the underlying collateral consists of a pool of open-end
leases in which the lessees are responsible for any residual value losses.
Therefore, the potential credit loss is driven primarily by the
default likelihood of the lessees, the recovery rate when a lessee
defaults, and the diversity of the pool of lessees. The credit
risk of the corporate lessees is the primary credit concern in fleet lease
ABS. As long as the lessees are able and willing to maintain their
lease payments, the transaction will not be subject to residual
value losses on defaulted leases. Aside from the quality of the
lessees themselves, the strength of the pool will also depend in
part on its diversity. Residual value risk generally comes into
play only if a lessee defaults on the lease because the lessee is generally
responsible for shortfalls in residual value. This is in contrast
to consumer auto lease ABS backed by closed-end leases, where
investors are usually exposed to the risk of residual value loss at lease
We use two modeling approaches to quantify these risks in this transaction.
The first applies the Binomial Expansion Technique (BET), in which
we construct a hypothetical lease pool with characteristics similar to
the one in the subject transaction. These characteristics are 1)
a diversity score that indicates the hypothetical number of independent
lessees in the pool by accounting for the pool's lessee and industry
concentrations, 2) a default distribution derived from the average
ratings of the lessees in the pool and the diversity score, and
3) a recovery rate on defaulted leases.
Recoveries can come from the disposition of a defaulted lessee's
fleet or from amounts received from a defaulted lessee in a case in which
the lease is affirmed in bankruptcy court. We use the pool's
diversity score and average implied default rate to generate a pool binomial
default distribution. We then calculate the weighted average present
value of losses on the proposed securities under the various assumed lease
recovery rates using a cashflow model depicting the rated bonds'
payment priorities. The weights used are the probabilities associated
with each lessee default scenario. The probability weighted average
loss of each security, i.e., its expected loss,
at a given recovery rate on the collateral, is then compared with
Moody's Idealized Cumulative Expected Loss Rates table to determine
its rating. A security will be able to achieve its target rating
if the breakeven recovery rate on the collateral, which is the minimum
recovery rate needed to arrive at that rating, is below our benchmark
recovery rate established by the committee for that particular rating
The second modeling approach is the Hybrid CDOROM approach, which
does not rely on a proxy pool. This method has two steps.
In step one, we use Moody's CDOROM simulation model to generate
a default distribution based on the probability of default of each lessee
(represented by its Moody's rating or an estimate thereof) and the
relative sizes of the lessee concentrations in the pool, their industry
classifications, and the correlation among the lessees and industries.
In the second step, we apply the probability of default distribution
generated by the model to the cashflow model used in the BET method,
with all other assumptions and inputs remaining the same.
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
Information source(s) used to prepare the credit rating is/are the following:
parties involved in the ratings, public information and confidential
and proprietary Moody's Investors Service's information.
Moody's Investors Service considers the quality of information available
on the transaction satisfactory for the purposes of maintaining a credit
For more information please see www.moodys.com.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's upgrades two classes of Wheels Inc. sponsored fleet lease ABS
250 Greenwich Street
New York, NY 10007