July 7, 2016 - 9:34 AM EDT
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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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst
Timothy McNally
Associate Director
+1-212-908-0870
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Thomas Kaiser, CPA, CFA
Associate Director
+1-312-368-3338
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0214
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]


Source: Business Wire (July 7, 2016 - 9:34 AM EDT)

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