Moody's Investors Service has placed on review for possible upgrade ten tranches from five auto loan deals sponsored by Chrysler Financial Services Americas from 2006 to 2008.
The actions are due to updated lower lifetime cumulative net loss (CNL) expectations as well as build up in credit enhancement relative to remaining losses.
As performance stabilized over the past 12 months, the range of expected lifetime CNL was lowered in this review for the 2007 and 2008 Chrysler Financial deals compared with the rating agency's previously published range from July 9, 2009.
But, the performance of 2007 and 2008 Chrysler Financial transactions has stayed much weaker compared with Moody's original loss expectations.
The rating agency's current lifetime CNL projections for the impacted deals range between 2.50% and 7.50% of the original pool balance.
Particularly, for the 2006-B and 2006-C deals, the current loss projection (as a percentage of the original pool balance) ranges from 2.25% to 2.75%.
For the 2007-A, 2008-A, and 2008-B transactions, the current loss projection ranges from 6.50% to 7.50%.
These are up from the original ranges at the time of closing of 2.00% to 2.25% for the 2006
transactions, and 2.50% to 3.50% for the 2007 and 2008 transactions.
During its review period, the rating agency will continue to refine its assessment of the pool performance relative to the available credit enhancement levels.
Total hard credit enhancement (excluding available excess spread and yield supplement overcollateralization (YSOC) ) for Class B tranches ranges from around 13% to 34% of the outstanding collateral pool balances adjusted for YSOC.
Hard credit enhancements for Class C tranches from 2007 and 2008 transactions range approximately from 10% to 11%. The YSOC compensates for the lower APR on the subvened loans, the rating agency said, and declines each month based on a fixed schedule. The YSOC for these offerings now ranges between about 2% to 4%.
The performance expectations for a given variable confirm the rating agency's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations.
Performance that falls outside the given range might imply that the collateral's credit quality is stronger or weaker than the agency's had anticipated when the related securities ratings were issued.
Even if this were so, a deviation from the expected range will not really result in a rating action nor does performance within expectations preclude such actions, Moody's said. The decision to take or not take a rating action is reliant on an assessment of a range of factors such as the deal's performance metrics.
Primary sources of assumption uncertainty are the macroeconomic environment as well as weakness in the used vehicle market.
The rating agency now views the used vehicle market as stronger compared to how it was a year ago, when the uncertainty relating to the economy as well as the future of the U.S auto manufacturers was considerably higher.
Overall, Moody's central global scenario remains "Hook-shaped" for 2010 and 2011; we expect overall a sluggish recovery in most of the world largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels.
The principal methodology used in these rating actions was Moody's Approach to Rating U.S. Auto Loan-Backed Securities that was published in June 2007.
Other methodologies and factors that may have been considered in the process of rating these
deals can also be found in the Rating Methodologies sub-directory on Moody's Web site www.moodys.com.