MRO Magazine

Fitch Expects to Rate Mercedes-Benz Master Owner Trust, Series 2016-B; Presale Issued


May 16, 2016
By Business Wire News

NEW YORK

Fitch Ratings has assigned a ‘AAAsf (EXP)’ rating to the class A notes of Mercedes-Benz Master Owner Trust, Series 2016-B (MBMOT 2016-B). The Rating Outlook is Stable.

KEY RATING DRIVERS

Strong Receivables Quality: The receivables have approximately 91% new vehicles backed mainly by MB vehicles, as well as a small portion of those of other manufacturers.

Asset Concentration Limits: Dealers are subject to concentration limits, mitigating the risk of individual dealer defaults and losses. The exposure to individual vehicle types, dealer credit ratings and state concentrations is mitigated by concentration limits.

Strong Dealer Network: Current dealer performance, financial metrics and overall health of the MB dealer network are strong, with the majority of dealers profitable in early 2016.

Strong Trust Performance: MBMOT continues to exhibit positive trends in overall performance metrics, including strong monthly payment rates (MPRs) and stable asset yields, low agings and no dealer defaults or trust losses.

Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for the class A notes totals 16.88% (16.25% overcollateralization [OC] and a 0.63% reserve), consistent with 2015-A/B. Structural features, including early amortization triggers, mitigate risks stemming from dealer/manufacturer defaults/bankruptcies.

Consistent Origination and Servicing: MBFS USA demonstrates adequate abilities as an originator, underwriter and servicer, as evidenced by the historical performance of MBFS’s portfolio and MBMOT.

Legal Structure Integrity: The legal structure of the transaction provides that a bankruptcy of MBFS USA would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

To conduct rating sensitivity for the issued notes, under a category B Dealer Floorplan platform, Fitch assumes portfolio default levels at 10%, 25%, and 40%, and under two recovery-level scenarios of 50% and 30%. Fitch modelled these series with the assumption that the above defaults have occurred and recoveries stressed accordingly, reflecting asset performance in a stressed environment. Remaining expected loss levels were compared with the stressed loss assumption grid commensurate with various rating levels.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has assigned the following expected rating:

–$375,000,000 class A notes at ‘AAAsf (EXP)’; Outlook Stable.

Additional information is available at www.fitchratings.com.

Mercedes-Benz Master Owner Trust, Series 2016-B
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881805

Applicable Criteria

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Fitch’s Interest Rate Stress Assumptions for Structured Finance and Covered Bonds – Excel File (pub. 22 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=840189

Global Rating Criteria for Dealer Floorplan ABS (pub. 05 May 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880077

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

Mercedes-Benz Master Owner Trust, Series 2016-B – Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881808

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004525

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004525

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:
Margaret Rowe, +1-312-368-3167
Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst:
Timothy McNally, +1-212-908-0830
Associate Director
or
Committee Chairperson:
Hylton Heard, +1-212-908-0214
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
sandro.scenga@fitchratings.com