Fitch rates Wachovia Auto Loan Owner Trust 2006-1 as follows:
-- $276,000,000 fixed-rate class A-1 asset-backed notes 'F1+';
-- $469,000,000 fixed-rate class A-2 asset-backed notes 'AAA';
-- $364,000,000 fixed-rate class A-3 asset-backed notes 'AAA';
-- $223,000,000 fixed-rate class A-4 asset-backed notes 'AAA';
-- $57,300,000 fixed-rate class B asset-backed notes 'AA';
-- $61,000,000 fixed-rate class C asset-backed notes 'A';
-- $49,700,000 fixed-rate class D asset-backed notes 'BBB'.
The securities are backed by a pool of new and used automobile and light-duty truck installment loans originated by WFS Financial Inc (WFS), a subsidiary of Wachovia Bank N.A. (Wachovia). The ratings on the notes are based on the enhancement provided by subordination, over-collateralization (OC), and a cash reserve account. The ratings also reflect the servicing capabilities of Wachovia, the high quality of retail auto receivables originated by WFS, and the sound legal and cash flow structures. Wachovia Auto Loan Owner Trust 2006-1 represents Wachovia's first securitization of WFS collateral subsequent to its purchase of Wescorp and its auto finance business, WFS.
The class A notes have initial credit enhancement (CE) of 13.00 %, consisting of 11.00% subordination, 1.75% initial OC, and a 0.25% reserve. The class B notes are supported by initial CE of 9.25% comprised of 7.25% subordination, 1.75% initial OC, and a 0.25% reserve. The class C notes have 5.25% CE (3.25% subordination, 1.75% initial OC, and a 0.25% reserve), and the class D notes have 2.00% initial CE (1.75% OC and a 0.25% reserve). CE is expected to grow to 16% for class A; 12.25% for class B, 8.25 for class C and 5.00% for class D via accumulation of the cash reserve account to 0.50% of the initial pool balance and the growth of OC to 5.00% of the outstanding pool balance less the reserve account balance. Cash reserve floor is set to 0.50% of the initial pool balance while an initial floor for OC equals to 1.00% with the step down feature that allows the OC floor to decrease to 0.75% and 0.50% at month 30 and 36 respectively, provided certain delinquency and cumulative net loss performance measures are met.
As of the cutoff date, the receivables had a weighted average APR of 12.52%. The weighted average original maturity of the pool was 64.2 months and the weighted average remaining term was 62.7 months resulting in approximately 1.5 months of collateral seasoning. The pool has a large concentration of receivables originated in California (34.33%). The next four largest state concentrations are Arizona (5.83%), Washington (5.66%), Texas (4.08%) and Oregon (3.09%). The exposure in California may subject the pool to potential regional economic downturns; however, the remaining portion of the pool is well diversified.
Interest and principal are payable monthly, beginning Nov. 20, 2006. Additional structural protection is provided to senior noteholders through a shifting payment priority mechanism. In each distribution period, a test will be performed to calculate note collateralization amounts. If notes are undercollateralized, payments of interest to subordinate classes may be suspended and made available as principal to higher rated classes.
Based upon a review of WFS's retail auto loan portfolio performance, prior WFS securitizations, and the composition of the assets in the securitized pool, Fitch expects Wachovia Auto Loan Owner Trust 2006-1 to perform consistent with recent securitizations. Through June 30, 2006, WFS's managed retail portfolio of approximately $13.9 billion had total delinquencies of 1.87%, and net chargeoffs of 1.28% (annualized). Both statistics were calculated as a percentage of the amount of contracts outstanding.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
