Multilease AG, the finance arm of a Swiss auto importer, is making its first strip to the European securitization market.

A total of 297 million Swiss Francs (CHF) of notes will be issued in the transaction, dubbed First Swiss Mobility 2017-1. Standard & Poor’s expects to assign an AAA to the senior, CHF 260.70 million tranche, which benefits from 23.1% credit  support consisting of subordination, a cash reserve account, and excess spread. There is also a CHF 22.2 million tranche rated AA- and a CHF 14.1 million tranche rated BBB+.

All of the notes have a legal final maturity of April 2027.

The notes are backed by a portfolio of auto lease receivables, which Multilease AG granted to Swiss clients of its parent company, Emil Frey Group, one of the largest independent auto lessors.

The transaction will be revolving, meaning new collateral can be added, for 32 months; less if certain performance triggers are breached. After the end of the replenishment period, the notes will amortize sequentially, using all principal and excess interest collections to pay them down.

The transaction is not exposed to interest rate mismatches, because both the notes and the receivables pay fixed interest rates. Accordingly, no swap is in place.

The deal is only the second Swiss auto lease securitization by any sponsor that S&P has rated.  It is structured so that the securitization trust acquires the entire lease contracts, together with all rights and obligations, effectively acting as the lessor.

S&P expect to see about 1.7% of defaults in the securitized pool, taking into account potential portfolio deterioration through adverse asset replenishment. “We used the highest range of gross loss multiples to recognize that this is Multilease AG's first transaction and the limited number of comparable transactions in the Swiss market,” the presale report states.

Of the portfolio, 40% (under the replenishment criteria) could comprise residual values, which are subject to market value decline risk.

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