Scope Ratings has assigned definitive ratings to the notes issued by ROOF Poland Leasing 2014 DAC on 2 December 2015 as follows:

Class A-1 (ISIN XS1123386838), PLN 636.0m: assigned new rating AAA_SF
Class A-2 (ISIN XS1313115161), PLN 234.2m: assigned new rating AAA_SF
Class B (ISIN XS1313115328), PLN 383.5m: assigned new rating BBB+_SF

ROOF Poland Leasing 2014, DAC is a cash flow securitisation of a two-year revolving portfolio made up of leasing receivables, worth PLN 1,474.9m at the restructuring date, which are granted to Polish small- and medium-sized enterprises and self-employed individuals. Raiffeisen-Leasing Polska SA originated the assets to finance the acquisition of vehicles and machinery by customers in Poland. The transaction closed in December 2014 and was restructured on 2 December 2015.

Rating rationale (summary)

The ratings reflect the legal and financial structure of the transaction; quality of the underlying receivables in the context of the Polish macroeconomic environment; capability of Raiffeisen-Leasing Polska SA (RLPL) as the servicer and TMF Poland Sp. z o.o. as the back-up servicer (BUS); counterparty risk exposure to Elavon Financial Services Ltd, UK branch as the account bank and paying agent; and the corporate and trustee services of TMF Administration Services Ltd and US Bank Trustees Limited, respectively.

Scope believes the credit enhancement from overcollateralisation and excess spread can sufficiently support the ratings, and protect class A-1 and A-2 (jointly, the ‘class A notes’ or ‘class A’) and class B notes against losses from the revolving portfolio of SME leasing receivables. The risk of portfolio performance deterioration is mitigated partly by early amortisation triggers. Asset- and portfolio-level covenants limit qualitative changes to the portfolio’s composition.

A static portfolio was modelled from the least-favourable migration of portfolio characteristics (i.e. maximum concentrations of leasing contracts to finance trucks and trailers, 12%, and machinery and equipment, 25%) and the maximum principal deficiency from losses over the replenishment period (0.5% of the preliminary portfolio). Scope expects a blended mean lifetime default rate of 8.2% with a coefficient of variation of 43%, assuming an inverse Gaussian probability distribution of portfolio default rates. These assumptions are driven by the different historical performance of the four receivable segments in the portfolio: new cars (5.5%), used cars (7.0%), trucks and trailers (11.0%), and machinery and equipment (12.5%).

Scope accounted for the risk of a change in origination strategy after RLPL is sold by considering the rating sensitivity against a higher portfolio default-rate volatility (blended coefficient of variation of 88%). The risks of changes to the portfolio’s credit profile or the risk of performance deterioration are enlarged for this transaction because of uncertainty around the sale of RLPL as announced by Raiffeisen Bank International.

A weighted average recovery rate of 30% was modelled by Scope. This rate does not include recovery proceeds from the liquidation of leased objects, which are at risk of being commingled with the insolvency estate of the originator upon its default.

In Scope's view, the ratings are not negatively affected by sovereign risk in Poland. Institutional meltdown or capital transfer risks are remote over the class A’s expected weighted average life (WAL) of 3.2 years. Poland benefits from a growing economy that is supported by domestic growth and recovery in the eurozone. The transaction is denominated in local currency and not subject to convertibility risks.

Scope has published today a New Issue Rating Report, which provides a complete rating rationale as well as rating drivers, analysis and sensitivity, in addition to regulatory disclosures. The New Issue Rating Report is freely available on www.scoperatings.com by clicking here.