Fitch Expects to Rate Mercedes-Benz Auto Receivables Trust 2013-1; Presale
NEW YORK -- July 22, 2013
Fitch Ratings expects to assign the following ratings and Rating Outlooks to
the notes issued by Mercedes-Benz Auto Receivables Trust (MBART) 2013-1:
--$278,900,000 class A-1 'F1+sf';
--$305,600,000 class A-2 'AAAsf'; Outlook Stable;
--$275,500,000 class A-3 'AAAsf'; Outlook Stable;
--$115,000,000 class A-4 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Strong Collateral Quality: The weighted average (WA) FICO of 766 is consistent
with recently issued MBART transactions and combined with the strong internal
credit tier distribution, indicates a strong borrower. However, the pool
contains higher concentrations in used and extended term loans, which have
experienced greater losses historically.
Sufficient Credit Enhancement (CE): 2013-1 incorporates a sequential-pay
structure. Total initial hard CE in 2013-1 for the class A notes is 2.75%
(overcollateralization [OC] of 2.50% plus a 0.25% initial reserve). Yield
supplement OC will be used to boost the transaction's APR, providing expected
excess spread of 2.52%. CE is sufficient to cover Fitch's 'AAAsf'-stressed
Strong Portfolio/Securitization Performance: Recently, MBFS' securitizations
and serviced portfolio have experienced improved loss performance.
Unstable Economic Outlook: A slower recovery and potential for volatility
could affect delinquencies and losses. Fitch's analysis accounts for this risk
by including poorer performing vintages from the recent recession in the base
case loss analysis.
Legal Structure Integrity: The legal structure of the transaction should
provide that a bankruptcy of Daimler or MBFS would not impair the timeliness
of payments on the securities.
Stable Origination/Underwriting/Servicing: Fitch believes MBFS to be a capable
originator, underwriter, and servicer for prime auto loan collateral, as
evidenced by historical delinquency and loss performance of its
securitizations and managed portfolio.
Unanticipated increases in the frequency of defaults and loss severity on
defaulted receivables could produce loss levels higher than the base case and
could result in potential rating actions on the notes. Fitch evaluated the
sensitivity of the ratings assigned to Mercedes-Benz Auto Receivables Trust
2013-1 to increased losses over the life of the transaction. Fitch's analysis
found that the class A notes display little sensitivity to a moderate increase
in defaults and losses, showing no potential downgrades under Fitch's moderate
(1.5x base case loss) scenario. However, class A notes could experience
downgrades of up to two rating categories under Fitch's severe (2.5x base case
Key Rating Drivers and Rating Sensitivities are further described in the
accompanying presale report.
The presale report is available to all investors on Fitch's website at
'www.fitchratings.com'. For more information about Fitch's comprehensive
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surveillance, and credit reports on more than 20 asset classes, contact
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Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 25, 2013);
--'Rating Criteria for U.S. Auto Loan ABS' (April 10, 2013);
--'Structured Finance Tranche Thickness Metrics' (July 29, 2011).
Applicable Criteria and Related Research: Mercedes-Benz Auto Receivables Trust
Global Structured Finance Rating Criteria
Rating Criteria for U.S. Auto Loan ABS
Structured Finance Tranche Thickness Metrics
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