Daimler AG's Mercedes-Benz Financial Services next securitization pools leases with stronger credit quality than any transactions the sponsor has completed since 2011, according to Fitch Ratings.
In total the sponsor plans to issue $1 billion in bonds backed by lease payments on new Mercedes-Benz vehicles.
Mercedes-Benz Auto Lease Trust 2015-B pool loans with a weighted average FICO score of 784 – the highest of any of the MBALT transactions. The higher FICO of the pool is bolstered by an increase in the concentration of loans with FICOs greater than 800, which represent 45.1% of the MBALT 2015-B pool.
According to Fitch, the trend toward higher concentrations of more creditworthy borrowers began with the 2013-A pool.
MBALT 2015-B also includes a smaller concentration of leases with terms greater than 36 months. Lease with longer terms are typically a driver for "residual," meaning investors in the securities are potentially at risk if the resale value of the vehicles falls sharply. The pool is seasoned at 11.5 months; the contracts still have a weighted average remaining term to maturity of approximately 24 months.
Residual risk in the transaction is also mitigated by the percentage of more affordable cars in the pool. Mercedes-Benz has recently been offering more models with lower manufacturer suggested retail price (MSRP), including the C class, which is the largest model in the 2015-B pool. The model has an initial MSRP of approximately $38,000, which could be considered non-luxury, according to Fitch. Nearly half the 2015-B pool have MSRPs below $60,000.
"Though the pool still contains certain models with MSRPs that could potentially expose the pool to greater residual value risk, [we] believe this portion of the pool to be minimal compared to larger portion of the pool concentrated in lower MSRP models," the presale report states.
Fitch assigned a preliminary 'F1+' rating to $218 million of money market notes and an 'AAA' rating to $793 million worth of class A notes, including $440 million of class A-2 notes maturing on Jan. 16, 2018, $230 million of class A3 notes maturing on July 16, 2018, and $123.5 million of class A4 notes maturing on May 17, 2021. All four senior tranches benefit from 16.65% credit enhancement.
Citigroup is the lead underwriter.