BMW (Schweiz) AG is marketing its second-ever securitization of consumer and commercial vehicle leases in Switzerland in a €364.2 million cross-currency transaction

The bonds are backed by 13,430 vehicle lease contracts with outstanding balances totaling CHF396 million Swiss francs (€361.2 million).

Moody’s Investors Service and S&P Global Ratings have each assigned preliminary triple-A ratings to the €275 million Class A series of floating-rate notes in Bavarian Sky Europe S.A., Compartment Swiss Auto Leases 2. The senior bonds carry 25.2% credit enhancement, mostly through subordination of the unrated Class B notes that will be denominated in francs (totaling CHF97.8 million, or €89.2 million).

The portfolio consists of lease contracts originated through 117 BMW franchise dealers to both individual owners (77.86% of the collateral pool) and small commercial obligors. Eighty percent of the contracts are for new BMW or MINI brand vehicles, with an average of 2.7 years remaining on the leases and a weighted average portfolio interest rate of 5.04%.

Structured as a revolving pool, BMW can replenish the collateral with new contracts over the next two years.

None of the loans in the existing pool are delinquent. Moody’s has forecast a cumulative default expectation for the pool of 3.5% and a recovery rate of 50%. S&P expects a 1.8% default rate of the pool.

The Swiss securitization is the first since Bavarian Sky Europe S.A., Compartment 1 Switzerland closed in April 2013. S&P noted the two transactions have similar features, although BavSky C1S was issued in Swiss franc-denominated notes, and had a longer revolver period of 36 months.

Joint lead managers are ING Bank N.V. and Bank of America Merrill Lynch.

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