DBRS Confirms 2 Classes and Upgrades 1 Class from Fleet Leasing Receivables Trust, Asset-Backed Notes, Series 2010-1

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 (collectively, the Class A-2 Notes) issued by Fleet Leasing Receivables Trust (the Trust):

– AAA (sf) Asset-Backed Notes, Series 2010-1, Class A-2a
– AAA (sf) Asset-Backed Notes, Series 2010-1, Class A-2b

DBRS has also upgraded the rating from A (sf) to AA (sf) on the Asset-Backed Notes, Series 2010-1, Class B (collectively, with the Class A-2 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 overcollateralization and the Cash Spread Account. The overcollateralization floored in April 2011 and stands at 10.5% of the current collateral balance. The Cash Spread Account is non-amortizing, increasing the protection provided to the noteholders from 2.25% of the closing balance to 9.9% of the current collateral balance as of March 31, 2012. In addition, the Class A Notes have preferential access to collections arising from the subordination of the Class B Notes, equivalent to 18.7% of the current collateral balance. Total current enhancement level for the Class A Notes stands at 39.1% and for the Class B Notes, 20.4%.

(2) In addition to the enhancement amounts, for each lease not yielding enough interest to offset the Trust’s monthly cost of funds, a Required Yield Supplement Amount of $2,830,793 was calculated at the onset of the transaction and deposited in the form of cash to the Yield Supplement Account. Each month the Required Yield Supplement Account is recalculated and the funds in the Account are replenished or released accordingly. Due to the amortizing nature of the portfolio, the weighted cost of funds and the prevailing interest rates, the Required Yield Supplement account stands as of March 31, 2012, at $1,170,828, and is equivalent to 1.2% of the collateral balance.

(3) Fleet customer accounts securitized are open-ended lease contracts, protecting the structure from residual value exposures.

(4) The delinquency ratio experienced by the Trust pool remains stable, averaging 0.6% since the onset of the transaction in December 2009. The write-offs experienced by the collateral pool have been mainly the result of administrative issues, rather than the inability of the obligor to pay. As a result, the majority of the amounts charged off have been recovered in later months, with cumulative losses as of March 31, 2012, representing only one basis point of the initial pool balance. Overall, the strong performance is attributable to the customer base of PHH, the services provided by PHH and the importance of the assets leased to the businesses of PHH customers.

(5) PHH has significant experience in originating and managing a diverse pool of fleet customers, with a high percentage of customers with an investment-grade rating. PHH has also been successful in diversifying its revenue base to include more fleet management services.

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

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 below).

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

The applicable methodology is Rating Canadian Auto Fleet Lease Transactions, which is available on our website under Methodologies.