DBRS Canadian Structured Finance Comments on Royal Bank of Canada Acquisition of Ally Credit Canada Limited

DBRS has today commented on the closing of the Royal Bank of Canada (RBC) acquisition of the Canadian auto finance and deposit business of Ally Financial Inc., consisting of Ally Credit Canada Limited and ResMor Trust Company (Ally Canada), on February 1, 2013.

Pursuant to the closing of the acquisition, RBC will assume all obligations of Ally Canada, including Canadian Capital Auto Receivables Asset Trust II and Canadian Capital Auto Receivables Asset Trust III (CCARAT II and CCARAT III, respectively). Currently, CCARAT II has three series of notes outstanding (CCARAT II 2011-1, 2011-2 and 2012-1) and CCARAT III has one series of notes outstanding (CCARAT III 2010-1).

As with any servicing conversion, there is risk of disruption during the transition, which is expected to be completed by the third quarter of 2013. However, integration risk is manageable given RBC’s experience with consumer auto lending and automotive floor plan financing, as it currently has over 300 dealer relationships and approximately $14 billion in receivables. RBC has indicated that the credit quality of the loans at Ally Credit Canada Limited is similar to that of its own auto loan portfolio.

In spite of some potential challenges in the near term, DBRS considers the acquisition positive for the performance of the transactions currently rated by DBRS.

DBRS will continue to monitor the performance of the trusts in its monthly ABS surveillance reports available online at www.dbrs.com.

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