OREANDA-NEWS. Fitch Ratings has placed Asset-Backed European Securitisation Transaction Fourteen S. r.l.'s (A-Best 14) notes and commingling reserve facility on Rating Watch Evolving (RWE), as follows.

EUR821.70m fixed rate Class A notes, due in April 2030: 'AA+sf' on RWE

EUR57.00m fixed rate Class B notes, due in April 2030: 'Asf' on RWE

EUR28.50m fixed rate Class C notes, due in April 2030: 'BBBsf' on RWE

EUR23.80m fixed rate Class D notes, due in April 2030; 'BBB-sf' on RWE

EUR33.25m commingling reserve facility; 'BBBsf' on RWE

A-Best 14 is a 25-month revolving securitisation of performing fixed-rate auto loans advanced to Italian individuals, including VAT borrowers (ie, professionals and artisans) by FCA Bank S. p.A. (FCAB, BBB/Positive/F2). Closing was on 11 May 2016 and the notes were issued on 16 May 2016. The transfer of the initial portfolio to the issuer was on 26 April 2016.

KEY RATING DRIVERS

The RWE follows the amendment of the transfer agreement signed by A-Best 14 and FCAB on 29 June 2016.

The amendment is the first step of a larger restructuring of the transaction, which is expected to be completed by the monthly payment date falling in November 2016 (the "Increase Date"), whereby the existing notes will be increased in size and based on the updated net present value (NPV) of the portfolio.

Amendments to the transfer agreement include: (i) a reduction of the flat discount rate from 7% to 4.34% for the initial portfolio (in line with the weighted-average nominal interest rate of the initial portfolio); and (ii) the inclusion of a mechanism whereby the discount rate of each subsequent portfolio transferred during the revolving period will be equal to the nominal interest rate of that subsequent portfolio, provided that the weighted-average discount rate of the overall portfolio is at least equal to 3.5%.

Due to these amendments, the NPV of the initial portfolio increased to EUR997m from EUR950m. The difference of EUR47m will be treated as a deferred purchase price to be paid (outside the waterfall) by the issuer to FCAB on the Increase Date. In addition, the payment of the deferred purchase price by the Increase Date is now a condition precedent for the changes made to the transfer agreement.

There are two effects from the lower discount rates: (i) they create portfolio overcollateralisation, increasing credit enhancement for the notes (from 14.9%, 8.9%, 5.9% and 3.4% to 18.9%, 13.2%, 10.3% and 8.0% for the class A, B, C and D notes, respectively); and (ii) they jeopardises the excess spread available to the notes (from about 4.7% p. a. to 2%).

In Fitch's view, these effects largely offset each other. Fitch will analyse the new capital structure after the second step of the restructuring in November 2016 and will take rating actions accordingly, with the intention of resolving the RWE in the next six months. In addition, Fitch will analyse the effect of lower excess spread on the transaction's ability to prevent unpaid PDLs from building up during the revolving period.

RATING SENSITIVITIES

An increase in the size of the notes without their re-tranching to ensure higher credit enhancement than at closing may result in a downgrade of the notes and of the commingling facility reserve. A re-tranching which leaves the notes with higher credit enhancement than that available after the first step of the restructuring could trigger an affirmation of the class A notes and upgrades of the other notes.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis:

- Amendment agreements provided by FCAB

- Updated portfolio stratifications as of 23 April 2016 provided by FCAB

- Updated portfolio amortisation profile as of 23 April 2016 provided by FCAB