DBRS Confirms Ratings in Rental Car Finance Corp. (“RCFC”) Series 2011-1

DBRS, Inc. (“DBRS”) confirms the existing ratings for the Rental Car Asset Backed Variable Funding Notes, Class A at AAA (sf) and the Series 2011-1, Class B at ‘A’ (sf).

The rating confirmation is based on a review of a transaction amendment that provide for a change to the rating qualifications outlined in the LC agreement. The change went to “P-1” (Moody’s), or; if the LC is rated by DBRS, the equivalent rating level (“R-1 (middle)”) from “P-1” (Moody’s), and; if the LC is rated by DBRS, the equivalent rating level (R-1 (middle) for Series 2011-1. This change would mean that if one rating agency changed their rating the issuer would need to collateralize or replace the LC provider and I believe this change makes the transaction stronger.

The rationale for the confirmation includes:

oPerformance of the transaction is within DBRS expectations;
oThe credit enhancement is dynamic based on the collateral mix within the trust. The LC is a component of the credit enhancement for each respective series, which in addition to subordination is meant to address potential “stay risk”. The stay period is assumed to be 60 days; however, our stresses for this asset class at each rating category are as follows:

Liquidation Period--------Months
AAA (sf)------------------------ 7.0
A (sf) --------------------------- 3.0

o The risk of the liquidation period in our “AAA (sf)” stresses is 7 months or below which is commensurate with the LC provider’s short term rating.

o The structure provides for a liquidation of the LC if certain events occur. These events include:
(1) Decline in the rating outlined in the LC agreement (P-1 (Moody’s), and; if the LC is rated by DBRS, the equivalent rating level (R-1 (middle)) or
(2) LC expiration date or
(3) Default by the LC provider

o Commingling is restricted to two business days.

o The rating confirmation also reflects an exception to our current criteria which sets forth both a short-term rating of R-1 (middle) or long term rating of AA (low) for LC providers. The LC provider, Bank of America, N.A., currently meets the short-term rating criteria only. This exception is mitigated by the considerations cited above with regard to the short term nature of the risk and the coverage of the liquidation period as noted above.

The applicable methodology is Rating U.S. Rental Car Securitizations, January 2010 and Legal Criteria for U.S. Structured Finance Transactions, September 2009, which can be found on our website under Methodologies.