S&P Address Auto Lease PBGC Lien Rsk; Rtgs Afm, OffWtch
NEW YORK--May 16, 2003--Standard & Poor's--The funded status of many pension plans has changed dramatically in recent years. The increased frequency of pension plan "distress terminations" by financially troubled companies in bankruptcy has demonstrated that the risk of plan termination is more than theoretical in nature. As a result, the risk of the attachment of a lien by the Pension Benefit Guaranty Corp. (PBGC) should be given more weight when assigning ratings to auto lease transactions that are not structured in a manner that would mitigate this risk. For these reasons, Standard & Poor's is conducting a review of its outstanding ratings on certain auto lease transactions. On May 12, 2003, these securities were placed on CreditWatch with negative implications pending a review of updated pension fund related information that has been requested from the related plan sponsors.Upon the bankruptcy of the originator/plan sponsor, the PBGC would generally be unable to perfect a security interest in any of the originator/plan sponsor's corporate assets. Consequently, the liquid assets of the bankruptcy-remote titling trust could become a prime target for a PBGC lien. The PBGC's imposition of a lien on the assets of the titling trust generally would place the PBGC's claim against the originator/plan sponsor or any of its 80%-owned affiliates ahead of the interest of the auto lease noteholders to the extent such noteholders have only been granted a lien on the instrument evidencing a beneficial interest in the titling trust assets (a special unit of beneficial interest, or "SUBI") and not on the lease receivables and the vehicles themselves. In this instance, the senior claim of the PBGC against the titling trust assets would reduce the value of the collateral available to the noteholders. Because the assets owned by the titling trust would conceivably be the only ones available to the PBGC in the event of an originator/plan sponsor's bankruptcy, it is those assets, and not necessarily the corporate assets in existence today, that should be considered when determining the relative magnitude of the underfunded or potentially underfunded obligation of a sponsor's plan.
In resolving these CreditWatch actions, as well as evaluating future auto lease securitizations, Standard & Poor's will take the following factors into consideration:
| -- | The unsecured credit rating of the plan sponsor; |
| -- | The status of the pension fund. This will include consideration of asset and liability balances relative to the assets supporting the securitization. The materiality of the potential pension liability will be measured relative to titling trust assets and available credit enhancement to investors; |
| -- | ABS investor's exposure period based on the expected maturity of the note class; and |
| -- | Any structural feature built into the transaction that otherwise mitigates the risk. |
Based on a review of currently available information, Standard & Poor's Ratings Services today affirmed several of its ratings and removed them from CreditWatch, where they were placed May 12, 2003 (see following list).
RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE
BMW Vehicle Lease Trust
Asset-backed senior notes series 2000-A
Class Rating
To From
A-4 AAA AAA/Watch Neg
Certs AA- AA-/Watch Neg
MMCA Auto Lease Trust
Asset-backed notes series 2002-A
Class Rating
To From
A-1 A-1+ A-1+/Watch Neg
Nissan Auto Lease Trust
Asset-backed notes and certificates series 2001-A
Class Rating
To From
A-3 AAA AAA/Watch Neg
A-4 AAA AAA/Watch Neg
Nissan Auto Lease Trust
Asset-backed notes and certificates series 2002-A
Class Rating
To From
A-1 A-1+ A-1+/Watch Neg
A-2 AAA AAA/Watch Neg
Volkswagen Auto Lease Trust
Auto lease asset-backed notes series 2002-A
Class Rating
To From
A-1 A-1+ A-1+/Watch Neg
A-2 AAA AAA/Watch Neg
A-3 AAA AAA/Watch Neg
A-4 AAA AAA/Watch Neg
World Omni Auto Lease Securitization
Asset-backed notes series 2001-A
Class Rating
To From
A-3 AAA AAA/Watch Neg
A-4 AAA AAA/Watch Neg
B A A/Watch Neg
RATINGS REMAINING ON CREDITWATCH NEGATIVE (a)
Chesapeake Funding LLC
Floating-rate callable asset-backed notes series 2002-2 (b)
Class Rating
B A/Watch Neg
FELCO Funding III L.P.
Auto lease-backed notes series 2000-1 (b)
Class Rating
A-4 AAA/Watch Neg
B A/Watch Neg
MMCA Auto Lease Trust
Asset-backed notes series 2002-A (b)
Class Rating
A-2 AAA/Watch Neg
A-3 AAA/Watch Neg
B A/Watch Neg
Nissan Auto Lease Trust
Asset-backed notes and certificates series 2002-A (b)
Class Rating
A-3a AAA/Watch Neg
A-3b AAA/Watch Neg
Provident Auto Lease ABS Pass-Through Trust
Floating-rate asset-backed pass-through certificates series 2000-1 (b)
Class Rating
Certs AAA/Watch Neg
Provident Auto Lease ABS Pass-Through Trust
Floating-rate asset-backed pass-through certificates series 2000-2 (b)
Class Rating
Certs AAA/Watch Neg
Provident Auto Lease ABS Pass-Through Trust
Floating-rate asset-backed pass-through certificates series 2001-1 (b)
Class Rating
Certs AAA/Watch Neg
Chesapeake Funding LLC
Floating-rate callable asset-backed notes series 2002-1 (c)
Class Rating
A-1 AAA/Watch Neg
A-2 AAA/Watch Neg
Chesapeake Funding LLC
Floating-rate callable asset-backed notes series 2002-2 (c)
Class Rating
A-1 AAA/Watch Neg
A-2 AAA/Watch Neg
Greyhound Funding LLC
Floating-rate callable asset-backed notes series 2001-1 (c)
Class Rating
A-1 AAA/Watch Neg
A-2 AAA/Watch Neg
(a) Pending receipt of requested information from the plan
sponsors.
(b) If downgraded, the new ratings are expected to be within one
category of the current ratings.
(c) If downgraded, the new ratings are expected to be within two
categories of the current ratings.
Copyright 2003, Standard & Poor's Ratings Services