Fitch Expects to Rate Enterprise Fleet Financing, LLC Series 2016-2; Presale Issued
Fitch Ratings expects to assign the following ratings and Rating
Outlooks to the Enterprise Fleet Financing, LLC (EFM) Series 2016-2 (EFF
2016-2) notes:
--$188,000,000 class A-1 notes 'F1+sf';
--$468,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$94,200,000 class A-3 notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Strong Credit Quality Obligors: Although the vast majority of the
collateral is not rated by any nationally recognized statistical rating
organization (NRSRO), EFM's portfolio has experienced minimal
delinquencies and net losses. Fitch assumed a 'B' rating for unrated
obligors in its analysis.
Healthy Portfolio Diversification: Obligor and industry concentrations
are minimal. The single most-concentrated obligor represents 0.70% of
the pool, while the top industry, construction, represents only 7.9% of
the initial securitization value.
Lower Exposure to Oil and Gas: Exposure to the oil and gas industry has
declined to 5.4% of the initial SV in 2016-2, well below the platform's
historical range of 7%-16%, as the industry continues to experience a
prolonged state of decline. Concurrently, trucks have become a larger
part of the pool as EFM has shifted its fleet, taking advantage of the
potential benefit from elevated truck values in the current low
fuel-price environment.
Low Delinquency and Loss History: EFM's historical managed portfolio and
prior transaction delinquency and loss experience has been low, even
during periods marked by elevated levels in other consumer and
commercial asset classes due to a weak economy.
Sufficient Credit Enhancement: Initial hard credit enhancement (CE) is
slightly increased from the 2016-1 transaction. The proposed initial CE
of 8.68% is sufficient to support Fitch's 'AAAsf' stressed loss
assumption of 12.06%.
Minimal Residual Risk: Approximately 96.4% of the 2016-2 leases are
open-end leases, meaning the lessees bear the residual risk. The
remaining 3.6% of the leases are closed-end, under which the trust will
bear the wholesale market risk.
Quality Origination, Underwriting and Servicing Platform: EFM has
demonstrated adequate capabilities as originator, underwriter and
servicer, as evidenced by historical delinquency and loss performance of
securitized trusts and the managed portfolio.
Legal Structure: The legal structure of the transaction should provide
that a bankruptcy of EFM would not impair the timeliness of payments on
the securities.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults could produce
default levels higher than the projected base case default proxy and
impact available default coverage and multiples levels. Lower default
coverage could impact ratings and Rating Outlooks, depending on the
extent of the decline in coverage. In Fitch's initial review of the
transaction, the notes were found to have limited sensitivity to changes
in truck recovery rates and recovery rates associated with the
concentration of oil and gas collateral in the pool. Further details can
be found in the presale report.
Key Rating Drivers and Rating Sensitivities are further detailed in the
accompanying presale report, available at 'www.fitchratings.com'.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Ernst
& Young LLP. The third-party due diligence focused on comparing or
recalculating certain information with respect to 150 leases. Fitch
considered this information in its analysis and the findings did not
have an impact on our analysis/conclusions. A copy of the ABS Due
Diligence Form-15E received by Fitch in connection with this transaction
may be obtained through the link at the bottom of the rating action
commentary.
Key Rating Drivers and Rating Sensitivities are further described in the
presale report dated July 7, 2016. Fitch's analysis of the
Representations and Warranties (R&W) of this transaction can be found in
'Enterprise Fleet Financing, LLC 2016-2 -Appendix'. These R&Ws are
compared to those of typical R&W for the asset class as detailed in the
special report 'Representations, Warranties, and Enforcement Mechanisms
in Global Structured Finance Transactions' dated May 2016.
Key Rating Drivers and Rating Sensitivities are further described in the
accompanying presale report, available at 'www.fitchratings.com'
or by clicking on the link.
Additional information is available at 'www.fitchratings.com'.
Enterprise Fleet Financing, LLC, Series 2016-2
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884543
Applicable Criteria
Criteria for Rating U.S. Auto Lease ABS (pub. 24 Mar 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879019
Criteria for Servicing Continuity Risk in Structured Finance (pub. 17
Dec 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586
Exposure Draft: Counterparty Criteria for Structured Finance and Covered
Bonds (pub. 14 Apr 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412
Global Rating Criteria for CLOs and Corporate CDOs (pub. 09 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882840
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130
Related Research
Enterprise Fleet Financing LLC, Series 2016-2 -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884695
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008542
ABS Due Diligence Form 15E 1
https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1008542&flm_nm=15e_1008542_1.pdf
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008542
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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WEBSITE.
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