Fitch Expects to Rate DaimlerChrysler 2002-C 'AAA'
NEW YORK--Oct. 16, 2002--Fitch Ratings expects to rate DaimlerChrysler Auto Trust (DCAT) 2002-C Asset Backed Notes as follows:| -- | $380,000,000, 1.7875% Class A-1 Notes, F1+; |
| -- | $700,000,000, 2.07% Class A-2 Notes, 'AAA'; |
| -- | $550,000,000, 2.56% Class A-3 Notes, 'AAA'; |
| -- | $372,000,000, 3.09% Class A-4 Notes, 'AAA'; and |
| -- | $67,366,000, Certificates, Not Rated. |
The ratings on the class A notes are based upon funds in the reserve account, subordination of the certificates, initial overcollateralization amount (initial O/C), yield supplement overcollateralization amount (YSOA) and the availability of excess spread to create additional overcollateralization. The ratings also reflect the high quality of the retail auto receivables originated by DaimlerChrysler Services North America LLC (DCS) and the transaction's sound legal and cash flow structures. Fitch's ratings address the likelihood of full interest and principal payments in accordance with the terms of the underlying legal documents.
Initial credit enhancement for the class A notes, equal to 6.5% of the initial securities principal balance (ISPB), is comprised of 3.25% subordination, 3.0% initial O/C and 0.25% reserve. The initial O/C is expected to increase to 3.75% of the current pool balance through the use of excess spread resulting in a target credit enhancement level of 7.25%. On each distribution date, assuming the class A-1 notes have been paid in full, the reserve account is fully funded, and the O/C amount is equal to 3.75% of the current outstanding balance, excess cash from the underlying receivables is released to DaimlerChrysler Retail Receivables LLC.
The reserve account is fully funded at closing to its target level of 0.25% of the ISPB, which increases credit enhancement as the pool amortizes. Reserve funds are used to cover any interest shortfalls, as well as retire any class of notes on its legal final distribution date if collections are not sufficient.
DCAT 2002-C receivables consist of new and used automobile and light-duty truck installment loans. The pool's weighted average APR of 5.93% reflects DCS's ongoing use of incentives. Incentive lending is common among captives and tends to attract more creditworthy borrowers resulting in lower loss frequency. DCAT 2002-C incorporates a YSOA to compensate for loans with contract rates below 4.00%. The YSOA boosts the pool's effective APR to 7.15% and ensures collections are sufficient to cover debt service and build O/C under expected conditions.
Interest and principal on the class A notes is expected to be distributed on the 6th of each month, beginning November 6, 2002. Classes A-1 through A-4 are paid sequentially with no principal distributed to the certificate-holders until all the class A notes have been paid in full. Similar to the five previous DCAT transactions, the certificates do not bear interest. Subordinating the certificates and eliminating interest ensures that all collections on the receivables first go to pay interest and principal to the senior bonds. Excess spread available to turbo the class A notes is also increased under this structure.