Fitch Looks Under The Hood Of Auto Lease Securities
19 June 2000
Fitch Looks Under The Hood Of Auto Lease Securities
NEW YORK - While approximately one-third of all new retail vehicle sales in 1999 were leases, lease securitizations accounted for only 11.1% of total public auto asset-backed securities issuance, according to a new report released by the international rating agency Fitch."Given the record new vehicle sales levels and consumer demand for leasing, there is significant potential for growth in public term securitizations, but not until investors come to grips with the concept of residual value risk," said Joseph Astorina, Director, Fitch. "At this point, investors need to gain more understanding of and comfort with the risks posed by residual values in a securitization."
The new report predicts that growth in the auto lease ABS market is bound to accelerate as additional participants develop the requisite infrastructure and are able to take advantage of the economic benefits of lease securitization. In 1994, World Omni engineered the first public term securitization backed by auto lease contracts, and, since the debut of this asset class, four other issuers have brought public term auto lease securities to market.
The report covers all aspects of Fitch's auto lease securitization rating criteria, including collateral evaluation, credit analysis, structural considerations, and legal issues. Particular emphasis is placed on the key elements that differentiate auto lease securitizations from auto loan securitizations, including residual value risk.
Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.
