OREANDA-NEWS. S&P Global Ratings today assigned its preliminary ratings to Mercedes-Benz Auto Receivables Trust 2016-1's $1.248 billion asset-backed notes series 2016-1 (see list).

The note issuance is an asset-backed securities transaction backed by prime auto loan receivables.

The preliminary ratings are based on information as of Sept. 6, 2016. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.

The preliminary ratings reflect: The availability of approximately 6.2% credit support for the class A notes based on stressed cash flow scenarios. This credit support provides more than 5.0x coverage of our 0.55%-0.65% expected net loss range to the class A notes. The timely interest and full principal payments made under the stressed cash flow modeling scenarios appropriate for the assigned preliminary ratings. In our modeling approach, we used a bifurcated pool method, in which the subvented loans (those with annual percentage rates of 4% or less) prepay and default at lower rates than the nonsubvented loans. Our expectation that under a moderate ('BBB') stress scenario, all else being equal, the ratings on the class A notes will not decline by more than one rating category over a one-year period. This is consistent with our rating stability criteria, which describe the outer bound of credit deterioration within one year as one rating category in the case of 'AAA' rated securities (see "Methodology: Credit Stability Criteria," May 3, 2010). Credit enhancement in the form of overcollateralization, yield supplement overcollateralization, a reserve account, and excess spread. The credit quality of the underlying collateral, which consists of prime auto loans that have a weighted average FICO of 768 and weighted average seasoning of 15 months. The transaction's payment and legal structures.