Fitch IBCA Expects to Rate $1.684B Premier 1999-2 AB Nts AAA
28 April 1999
Fitch IBCA Expects to Rate $1.684B Premier 1999-2 AB Nts AAA - FITCH IBCA -
NEW YORK, April 27 -- Premier Auto Trust 1999-2's
$490 million class A-2, $520 million class A-3, and $344.369 million class A-4
asset-backed notes are expected to be rated 'AAA' by Fitch IBCA. The
$330 million class A-1 notes, expected to be rated 'F1+', and the unrated any
class $65.625 million certificates are not being publicly offered.
The expected 'AAA' ratings on the class A notes are based upon funds in
the reserve account, the subordination of the certificates, the initial
overcollateralization (OC) amount, and the availability of excess spread to
create additional OC. In addition, the expected ratings reflect the high
quality of the retail auto receivables originated by Chrysler Financial
Company, L.L.C. (CFC) and the sound legal and cash flow structures. The
transaction will be fully funded at closing.
Credit enhancement for the class A notes, initially 8.00%, grows as OC
builds through the use of excess spread. The initial OC, 4.00% of the initial
securities principal balance (ISPB), is expected to increase to 4.50% of the
current pool balance. On each distribution date, assuming the class A-1 notes
have been paid in full, the reserve account is fully funded to its specified
target, and the OC amount is equal to 4.50% of the current outstanding
balance, cash from the underlying receivables is released to Premier
Receivables L.L.C. on a cumulative basis up to the initial OC amount. Since
all excess spread is distributed as principal to the class A notes before and
after the payments to Premier Receivables L.L.C., OC increases over time,
providing substantial loss protection for each class of noteholders. In
addition, the reserve account is fully funded at closing to its target level
of 0.25% of the ISPB, which also increases credit enhancement as the pool
amortizes. Funds on deposit in the reserve account will be used to cover any
interest shortfalls, as well as retire any class of notes on its respective
final distribution date should collections on the receivables be insufficient
to do so in such monthly period.
The initial and target credit enhancement levels for the Premier 1999-2
transaction, 8.0% and 8.5%, respectively, are the same as the Premier 1999-1
transaction. This is due to the continuing strength in the performance of
Chrysler's retail auto portfolio and recent securitizations. In addition,
Premier 1999-1 and 1999-2 have similar pool compositions, including the
inclusion of receivables generated under Chrysler's Gold Key Plus Program.
Such receivables, as described below, have the effect of lowering the overall
net loss assumption used when determining appropriate credit enhancement
levels. Fitch IBCA remains comfortable that credit enhancement available is
sufficient to sustain losses at 'AAA' stress scenarios.
Chrysler's Gold Key Plus Program constitutes approximately 3.4% of the
pool, compared with 6.2% of the 1999-1 transaction. Similar to a lease,
contracts originated under this program provide for a stream of fixed monthly
payments with a final fixed payment at the end of the contract term. At the
end of the contract's term, the obligor has the option of 1) returning the
vehicle to Chrysler, 2) purchasing the vehicle by payment-in-full of the
vehicle's final fixed payment, or 3) refinancing the final fixed payment.
The final payment for a Gold Key Plus program receivable is equal to the
residual value of the vehicle which is set at origination of the contract.
The trust will receive only the fixed monthly payments pertaining to the
vehicle contracts originated under this program; the final payment is not
securitized. However, in the event of an obligor default, all proceeds from
the sale of the vehicle backing the receivable will first go to pay off the
principal balance of the fixed monthly payments due to the trust plus any
interest accrued up to the date of default. As the balance of the fixed
monthly payments is paid down, the residual value as a percentage of the
outstanding loan balance grows, effectively creating OC in the loan and
reducing loss exposure should the vehicle be repossessed and sold.
The total pool receivables will consist of new and used automobile and
light-duty truck installment loans and have a weighted average annual
percentage rate (WA APR) of 9.07%, slightly lower than the 9.11% WA APR of the
1999-1 Premier transaction. The receivables have a weighted average remaining
term of 56.95 months compared to 56.69 months in the 1999-1 transaction and
48.88 months in the 1998-5 transaction. The ratio of new to used vehicles
financed remained relatively stable at 78:22. Approximately 86% of the
vehicles represent financing of automobiles manufactured or distributed by
Chrysler Corp., relatively unchanged from the last transaction.
Similar to the three previous Premier transactions, the certificates do
not bear interest. By subordinating the certificates and eliminating
certificate interest, the structure assures 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.
Interest and principal on the class A notes will be distributed monthly,
beginning June 8, 1999. Classes A-1 through A-4 are sequential pay note
classes. No principal will be distributed to the certificateholders until all
the class A notes have been paid in full.