Distribution Fin Svcs RV Trust 1999-3 Rated by Fitch IBCA
30 July 1999
Distribution Fin Svcs RV Trust 1999-3 Rated by Fitch IBCA
NEW YORK--July 29, 1999--Fitch IBCA assigns the following ratings to notes issued by Distribution Financial Services RV Trust 1999-3: --$29.8 million class A-1 notes `AAA/F1+', --$100.3 million class A-2 notes `AAA', --$48.5 million class A-3 notes `AAA', --$86.6 million class A-4 notes `AAA', --$37.6 million class A-5 notes `AAA', --$54.8 million class A-6 notes `AAA', --$9.4 million class B notes `A', and --$7.5 million class C notes `BBB'.The ratings are based on the quality of the underlying collateral; a reserve account, initially funded at 0.50% of the initial pool balance, with a target of the greater of 2% of current pool balance or 0.75% of the initial pool balance; a targeted overcollateralization amount of 1%; and the sound legal and cash flow structure. In addition, the ratings on the class A notes are based upon the subordination provided by the class B and class C notes and the ratings on the class B notes are based upon the subordination provided by the class C notes. The ratings address the likelihood of payment of full and timely interest and ultimate principal by each class' stated maturity date.
The collateral securing the notes is a pool of recreational vehicle and horse trailer installment sales contracts with an aggregate outstanding balance of approximately $374.5 million. All of the contracts were originated or acquired by Deutsche Financial Services Corp. (DFS) or Ganis Credit Corp., which was acquired by DFS in May 1997. Servicing of the contracts is conducted by DFS, which is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is currently rated `AA/F1+' by Fitch IBCA. This transaction is DFS' second deal backed primarily by RV's and the first to include horse trailers.
Interest and principal on the notes are expected to be distributed on the fifteenth of each month, or next business day, beginning Aug. 16, 1999. Principal payments on the notes will be made sequentially, with class A notes with the lowest numeric designation receiving principal first; however, if an event of default occurs and the notes have been accelerated the class A notes will share principal collections pro rata.
Fitch IBCA applies various stress scenarios to the collateral pool to test the transaction's ability to withstand deterioration in asset performance. The expected ratings assigned to each class of notes are commensurate with the stress level that each class can withstand. The expected `AAA' rated notes can withstand an expected net loss multiple of 5 times (x), while the expected `A' and `BBB' rated notes can withstand multiples of 3x and 2x, respectively.
In addition to the subordination of the class B and class C notes, other structural credit enhancement is provided by the reserve account, a targeted overcollateralization (O/C) amount of 1% and the subordination of servicing fees while DFS is servicer. The reserve account will initially be funded at 0.50% of the initial pool balance, with a target balance of the greater of 2% of the current pool balance or 0.75% of the initial balance. The reserve account floor provides significant protection in the transaction's later stages. Excess spread will be used to fund the reserve account to its targeted level and then will be used to turbo principal on the bonds to create overcollateralization, until the 1% O/C target is met. While DFS is servicer, servicing fees will be subordinated to the payment of interest and regular principal on the bonds. In addition to these structural features, excess spread will also be available to cover losses on the collateral once the reserve is funded and the target O/C level met.
The collateral pool consists of over 9,800 contracts, with an average contract balance of $38,214. The majority of the collateral consists of loans financing recreational vehicles, with approximately 4.7% financing horse trailers. The weighted-average coupon on the collateral is 8.95%, and the weighted-average remaining term is 170 months. Approximately 22% of the contracts were originated directly and the new/used breakdown is roughly 57/43. There is slight geographic concentration in the pool, with California, Texas, and Florida representing 19.78%, 11.08% and 8.65% of the pool, respectively. No other state accounts for more than 5% of the pool.