DBRS Confirms Canadian Capital Auto Receivables Asset Trust II, Series 2011-1

As part of DBRS’s continued effort to provide market participants with updates on an annual basis, DBRS has today confirmed the ratings on the following notes issued by Canadian Capital Auto Receivables Asset Trust II (the Trust):

– AAA (sf) on the Auto Loan Receivables-Backed Notes, Series 2011-1, Class A-1
– AAA (sf) on the Auto Loan Receivables-Backed Notes, Series 2011-1, Class A-2
– AAA (sf) on the Auto Loan Receivables-Backed Notes, Series 2011-1, Class A-3 (collectively, with the Class A-1 Notes and Class A-2 Notes, the Class A Notes)
– AA (sf) on the Auto Loan Receivables-Backed Notes, Series 2011-1, Class B
– A (low) (sf) on the Auto Loan Receivables-Backed Notes, Series 2011-1, Class C (collectively, with the Class A Notes and Class B Notes, the Notes)

The ratings are 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 non-amortizing overcollateralization and cash reserve amounts. The overcollateralization and the cash reserve account represent 3.2% and 1.4%, respectively, of the outstanding balance of the Notes as of January 2012. In addition, the Class A Notes have preferential access to collections arising from the subordination of the Class B Notes and the Class C Notes, equivalent to 4.0% of the Notes’ current outstanding balance. The Class B Notes also have preferential access to collections arising from the subordination of the Class C Notes equivalent to 1.1% of the current outstanding balance of the Notes. As of January 2012, the total credit enhancement available to the Class A Notes is 8.6%, to the Class B Notes is 5.7% and to the Class C Notes, 4.7%.

(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 to a maximum of 1.5% of the net discounted book value on the cut-off date.

(3) The discounting of the receivables provides for excess spread of approximately 3.4% annually (absent losses or replacement servicer fees).

(4) The delinquency (+60 days due) and loss rates have been stable since the start of the transaction, averaging four basis points (bps) and 13 bps, respectively. To date, the pool has experienced a cumulative loss within the expected range, equivalent to ten bps of the initial pool balance.

(5) The structure is pass-through with monthly principal payments, which avoids the risk of refinancing normally associated with term maturities. Matching of the fixed-rate receivables with fixed-rate notes eliminates the need for interest rate swaps in the structure.

(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.

(7) A well-diversified pool of obligors with respect to geographic representation in Canada.

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 Portfolio of Secured Loans). The Portfolio of Secured Loans was sold by ACCL or its affiliates 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 excess interest rate spread, the purchase price paid for the loans by the Trust was based on the net discounted book value.

The Notes bear fixed rates of interest, with monthly payment of interest and principal. The Trust pays interest pari passu, on a pro rata basis, across all classes of the Class A notes, and then pays interest sequentially to the remaining classes of notes in order of seniority. The payment of interest on lower-rated notes is subordinated to payment of principal of more senior notes only in limited circumstances, as described in the Prospectus. Principal on the Notes is being repaid sequentially, with the Class A-1 being paid prior to the repayment of any principal on the Class A-2 Notes and the Class A-2 Notes being paid prior to repayment of any principal on the Class A-3 Notes. Principal on the Class B Notes will be paid only after all principal repayments on the Class A Notes have been made and principal on the Class C Notes will not be paid until all principal repayments on the Class B Notes have been made.

As Servicer, ACCL is servicing the Portfolio of Secured Loans 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 a long-term debt rating of BBB (low) or better by DBRS, the Servicer will be permitted to commingle collections with respect to the Portfolio of Secured Loans 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 BB (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.

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 a replacement servicer fee of up to 1% per year.

If an event of default occurs, the Trust will first pay interest on the Class A Notes, pro rata, among the Class A Notes, and second will pay principal on the Class A-1 Notes until paid in full, and then will pay principal, pro rata, on the Class A-2 Notes and the Class A-3 Notes until paid in full. No payments of principal or interest on the Class B Notes will be made until all principal and interest amounts on the Class A Notes have been paid in full. No payments of principal or interest on the Class C Notes will be made until all principal and interest on the Class B Notes have been paid in full.

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