A-BEST 26 securitisation receives expected Fitch ratings for German auto loan notes

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A-BEST 26 Fitch ratings

Highlights

A-BEST 26 securitisation receives expected ratings of AAA(EXP)sf for class A through BBB-(EXP)sf for class E from Fitch, with classes M and X rated NR(EXP)sf.
Fitch assigns a 4.8% base case default rate and lowers base case recovery to 65% for A-BEST 26, reflecting weaker performance and challenging German economic conditions.
Only about 1.4% excess spread is expected at closing, but risks are partly mitigated by a static liquidity reserve and servicer replacement provisions.

Rating structure and transaction features

As reported by Fitch Ratings, A-BEST 26 has received expected ratings of AAA(EXP)sf for class A, AA(EXP)sf for class B, A+(EXP)sf for class C, BBB+(EXP)sf for class D and BBB-(EXP)sf for class E, while classes M and X are rated NR(EXP)sf. Final ratings remain contingent on the receipt of final documents that conform to information already reviewed.

The securitisation pools fixed-rate auto loans originated to German private and commercial obligors by CA Auto Bank S.p.A. Niederlassung Deutschland, the German branch of CA Auto Bank S.p.A. The bank is owned by Crédit Agricole Consumer Finance, part of Credit Agricole S.A.

The structure features a six-month revolving period and then moves from sequential amortisation to pro rata amortisation for classes A to M six months after that period ends. It switches back irreversibly to sequential amortisation if note balances fall below the portfolio amount or if default-related or other triggers are breached, although Fitch says its driving scenario for classes A to D assumes strictly sequential amortisation throughout the transaction life.

Credit assumptions and market implications

Fitch says its analysis reflects weaker recent performance in CAAB DE's 2023-2024 default vintages compared with periods when the originator was captive to the Stellantis group. The agency links that deterioration to difficult economic conditions in Germany, including high inflation and stagnation, as well as more permissive underwriting, while noting that defaults in 2025 decrease after tighter credit rules are introduced.

On that basis, Fitch assigns a 4.8% base case default rate, above the 4.5% used for the earlier German A-BEST 23 transaction, and lowers the base case recovery assumption to 65% from 70%. The agency also says only limited excess spread is available, with about 1.4% expected at closing after taking into account the provisional portfolio yield, structural costs and the swap rate, although a replacement servicer fee reserve partly offsets higher costs.

Fitch adds that servicer continuity risk is reduced despite the absence of a back-up servicer because the assets are standard and can be transferred, while a static liquidity reserve covers at least three months of interest on classes A to E. The ratings remain sensitive to higher defaults or lower recoveries, and Fitch says a simultaneous 25% decrease in the default base case and 25% increase in the recovery base case could support upgrades of up to four notches on the notes.

The latest update follows our earlier article on Europe macro policy, which examined trade-offs between inflation control, debt burdens and investment.

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