DBRS Confirms Canadian Capital Auto Receivables Asset Trust II, Series 2007-1

As part of DBRS’s continued effort to provide market participants with updates on an annual basis, DBRS has today confirmed the AAA (sf) rating on the VPR Loans, Series 2007-1 (the Notes) issued by Canadian Capital Auto Receivables Asset Trust II (the Trust).

The rating is based on the following factors:

(1) High levels of credit enhancement are available to protect the Notes. Credit protection to the Notes is provided by overcollateralization and a cash reserve account. The overcollateralization floored in January 2009 at $7,318,786, or 21.2% of the balance of the Notes as of April 2011. The cash reserve account is non-amortizing and was funded with an amount equal to $5,343,598, equivalent to 15.5% of the current balance of the Notes. Total credit enhancement available to the Notes stands at 36.7%.

(2) A cash reserve event will occur if the three-month average delinquency rate is greater than 1.25% or if the three-month average (annualized) loss rate is greater than 1.5%. In a cash reserve event, the required cash reserve amount will be increased by the greater of (1) an additional 1.0% of outstanding debt obligations or (2) 0.50% of the highest net investment (the additional cash amount).

(3) The discounting of the receivables provides for excess spread of approximately 4.8% annually (absent losses or replacement servicer fees).

(4) The pool has performed well since inception, with a slight deterioration in 2009 as the economic environment weakened. The delinquency ratio has averaged 12 basis points (bps). The annualized loss ratio net of recoveries has also been low, with an average annual rate of 25 bps.

(5) The time remaining to maturity of the outstanding notes is short (approximately five months).

(6) The significant experience of Ally Credit Canada Limited (ACCL) in the origination and servicing of retail auto loans and securitization transactions backed by those assets.

The net proceeds of the Notes were applied by the Trust to finance the purchase of a co-ownership interest in a portfolio of car and light truck secured loans (the Initial Portfolio). The Initial Portfolio was sold by ACCL to Canadian Securitized Holdings Auto Receivables Partnership (CSHARP) and subsequently to CSHARP and CCARAT II as tenants-in-common. As some of the loans were originated under special programs that provide for low-rate financing, the average annual percentage rate of the Initial Portfolio was not sufficient to pay funding costs for the CCARAT II obligations. In order to provide for interest spread, the purchase price paid for the loans by the Trust was based on the net discounted book value.

Although this transaction allowed for additional purchases in the 12-month period after the closing date, none was entered into.

Funding for the Trust on the closing date was provided by $720 million of Class A-1, Class A-2 and Class A-3 Notes, $27 million of Class B Notes, $5.4 million of Class C Notes and $316.3 million of VPR Loans. The Class A, Class B and Class C Notes were bullet bonds, while amounts under the VPR Loans grew as assets were added when Notes were refinanced.

Prior to the targeted final payment date, the Class A-1 Notes were refinanced through the issuance of VPR Loans as per an agreement with an ABCP issuer. With respect to the Class A-2 Notes, the Trust was unable to repay the full amount on the targeted final payment date; therefore, the Class A-2 Notes were deemed an Affected Class and received monthly payments from the pool cash flows. The Class A-2 Notes fully amortized between March and December 2009.

In April 2010, prior to the targeted final payment date of the Class A-3 Notes, the deal was restructured and reviewed. The Class A-3, Class B and Class C Notes were repaid through the issuance of VPR loans, as per an agreement with an ABCP issuer.

As Servicer, ACCL is servicing the portfolio in accordance with the credit and collection policies that are applied to its overall owned or managed portfolio of similar auto loans. Provided the Servicer achieves an unsecured short-term credit rating of R-1 (low) or better by DBRS, the Servicer will be permitted to commingle collections with respect to the Initial Portfolio with its own funds and make monthly deposits to the collection account. If this rating is not maintained, the Servicer will be required to make all required deposits within two business days of receipt or make such other arrangements as may be acceptable to DBRS. As the Servicer is currently rated below R-1 (low), deposits are to be made within two business days of receipt. Provided the ratings test above is satisfied, if obligors with respect to certain receivables pay amounts that exceed the scheduled amounts due at the time the payment is received, the Servicer may commingle the excess payments until they become due, unless the amount of the excess payments exceeds three scheduled payments, at which time the Servicer must apply the excess payments toward Trust outstandings. The Servicer may also, from time to time, make advances that reflect amounts that have yet to be received by the Servicer.

Ally Financial Inc. will use its reasonable best efforts to cause ACCL to comply with certain servicing obligations as set out in the program documentation.

In the event of a servicer default, the Servicer may be replaced by the indenture trustee. A replacement servicer that is not an affiliate of ACCL would be entitled to replacement servicer fees of up to 2% per year.

If an event of default occurs, the waterfall will pay all VPR Loans on a sequential basis. Any interest due on any of the debt obligations that is not paid on any payment date or distribution date, as applicable, will be due on the next succeeding payment date or distribution date, as applicable.

The performance and characteristics of the pool and the Notes are available and updated each month in the Monthly Canadian ABS Report (see Related Research).

For more detailed information on the transaction structure, please refer to the rating reports of the Trust at www.dbrs.com.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Canadian Auto Loan Securitization, which is available on our website under Methodologies.