DBRS Publishes Updated Canadian Auto Lease Securitization Methodology

DBRS has today released its updated methodology for rating Canadian auto lease securitizations (Methodology). The publication of this Methodology is part of DBRS’s continued effort to provide market participants with updates and insight into the rationale behind DBRS’s rating opinions.

Outlining the analytical approach that DBRS takes to rating auto lease securitizations in Canada, the Methodology discusses the key elements that DBRS evaluates through qualitative and quantitative analysis. The Methodology also consolidates the various criteria, industry studies and commentaries issued by DBRS since the last methodology for Canadian auto lease securitizations was published.

This Methodology is separated into three main sections, in addition to the background information and discussion on legal issues. First, a detailed review of the mechanics of a lease, including the inherent risks and benefits to the lessor; second, a look at the various elements that DBRS reviews in assessing the risk profile of a pool of auto leases as an asset class in Canada; and third, a summary of core enhancement considerations, such as the various forms of enhancement acceptable and a brief analysis on the value of excess spread. Key statistics and assumptions are provided in the form of ratings scales used by DBRS to determine a particular rating for each securitization. Also, a newly created risk matrix has been included in Table 4 at the end of the report to assist the reader in comparing and understanding the major risks identified within the various forms of auto securitizations available in public asset-backed securities or through multi-seller conduits.

Each DBRS rating is based on an analysis of the underlying assets, the transaction parties, the legal and funding structure, and the available credit enhancement. These considerations are assessed under various stress scenarios to ensure that commensurate enhancement is available to each rating assigned.

The Methodology is available by clicking on the link below or contacting us at info@dbrs.com.