DBRS Publishes Methodology for Canadian Rental Car Securitizations

DBRS has today released its methodology for rating Canadian rental car securitizations. The publication of this methodology is part of DBRS’s continued effort to provide market participants with insights into the rationale behind DBRS’s rating opinions. Building on the framework provided by other auto-related methodologies developed by DBRS, the methodology outlines the unique structuring elements that are involved in the securitization of rental car fleets.

“There have been a number of rental car fleet transactions in the Canadian marketplace dating back as far as 1997,” says Tim O’Neil, Vice President. “This transaction history has ensured that the methodology has been tested through the stresses of a volatile economic environment and within the automotive and car rental industries specifically.”

The methodology, which has been applied internally for several years, provides a brief overview of the rental car industry, followed by a review of the key variables in rating rental car fleet transactions in Canada, including the following:

(1) A structural overview from a legal and bankruptcy-remoteness perspective.

(2) An assessment of the credit quality of the rental car company as servicer/operator of the fleet.

(3) The credit quality of the auto manufacturers of the fleet.

(4) The residual value exposure in the fleet.

The methodology also provides a synopsis of the modelling assumptions and resulting enhancement guidelines employed to address the key risks identified and an auto industry risk matrix that will help market participants compare and understand the major risks identified within the various forms of auto securitizations.

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 providing DBRS's processes and criteria is available by contacting us at info@dbrs.com.