DBRS Publishes Methodology for Rating Canadian Auto Fleet Lease Securitizations

DBRS has today released its internal methodology for rating Canadian auto fleet lease securitizations. There is no impact on fleet lease transactions currently rated by DBRS and the publication of this methodology is part of DBRS’s ongoing efforts to provide greater transparency in the marketplace.

For the purposes of the auto fleet lease methodology, rental fleet leases are not considered. DBRS has a separate methodology for rental fleet securitizations, Rating Canadian Rental Car Securitizations, which can be accessed via www.dbrs.com.

The methodology, which covers commercial vehicle fleet lease receivables contracts, provides a brief overview of the auto fleet industry, followed by a review of the key variables in addressing the risks related to rating auto fleet lease 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 auto fleet companies as servicer/operator of the fleet.

(3) The credit quality of the underlying obligors.

(4) The reliance on and valuation of the underlying security.

(5) Structural risk and historical performance in auto fleet securitizations.

(6) Enhancement considerations.

There have been a number of auto fleet lease transactions in the Canadian marketplace funded through asset-backed securities (ABS) and asset-backed commercial paper (ABCP) and this transaction history has ensured that the methodology has been tested through the stresses of a volatile economic environment from a macroeconomic perspective and within the automotive industry specifically.

The methodology also incorporates an appendix with detailed tables summarizing the key points of the rating process. The purpose of the summary is to provide market participants with an easy-to-follow overview of the issues considered for auto fleet lease transactions and the criteria that form the rationale behind DBRS’s rating opinions.

DBRS has taken no rating actions as a result of the updated methodology.

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