DBRS Confirms Ratings on Canadian Capital Auto Receivables Asset Trust II

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

-- Auto Loan Receivables-Backed Notes, Series 2011-1, Class A-3 (the Series 2011-1, Class A Notes) at AAA (sf)
-- Auto Loan Receivables-Backed Notes, Series 2011-1, Class B (the Series 2011-1, Class B Notes) at AA (sf)
-- Auto Loan Receivables-Backed Notes, Series 2011-1, Class C (the Series 2011-1, Class C Notes; collectively, with the Series 2011-1, Class A Notes and the Series 2011-1, Class B Notes, the Series 2011-1 Notes) at A (sf)
-- Auto Loan Receivables-Backed Notes, Series 2011-2, Class A-3 (the Series 2011-2, Class A Notes) at AAA (sf)
-- Auto Loan Receivables-Backed Notes, Series 2011-2, Class B (the Series 2011-2, Class B Notes) at AA (sf)
-- Auto Loan Receivables-Backed Notes, Series 2011-2, Class C (the Series 2011-2, Class C Notes; collectively, with the Series 2011-2, Class A Notes and the Series 2011-2, Class B Notes, the Series 2011-2 Notes) at A (sf)
-- Auto Loan Receivables-Backed Notes, Series 2012-1, Class A-2 (the Series 2012-1, Class A-2 Notes) at AAA (sf)
-- Auto Loan Receivables-Backed Notes, Series 2012-1, Class A-3 (collectively, with the Series 2012-1, Class A-2 Notes, the Series 2012-1, Class A Notes) at AAA (sf)
-- Auto Loan Receivables-Backed Notes, Series 2012-1, Class B (the Series 2012-1, Class B Notes) at AA (sf)
-- Auto Loan Receivables-Backed Notes, Series 2012-1, Class C (the Series 2012-1, Class C Notes; collectively, with the Series 2012-1, Class A Notes and the Series 2012-1, Class B Notes, the Series 2012-1 Notes) at A (sf)

The ratings are based on the following factors:

1. High levels of credit enhancement are available to protect all the Notes.

(a) For the Series 2011-1 Notes, credit protection is provided by a non-amortizing reserve account that was seeded at the onset of the transaction with an amount equal to $7,617,350, which is equivalent to 6.1% of the outstanding note balance as of April 2014. The Series 2011-1 Notes also benefit from overcollateralization equivalent to 13.7% of the outstanding note balance as of April 2014. In addition, the Series 2011-1, Class A Notes have preferential access to collections arising from the subordination of the Series 2011-1, Class B Notes and the Series 2011-1, Class C Notes equivalent to 16.8% of the current outstanding note balance. The Series 2011-1, Class B Notes also have preferential access to collections arising from the subordination of the Series 2011-1, Class C Notes equivalent to 4.6% of the current outstanding note balance. Total credit enhancement levels available to the Series 2011-1, Class A, Class B and Class C Notes have increased to 36.6%, 24.4% and 19.9%, respectively, measured as a percentage of the outstanding note balance as of April 2014.

(b) For the Series 2011-2 Notes, credit protection is provided by a non-amortizing reserve account that was seeded at the onset of the transaction with an amount equal to $5,504,680, which is equivalent to 5.5% of the outstanding note balance as of April 2014. The Series 2011-2 Notes also benefit from overcollateralization equivalent to 9.6% of the outstanding note balance as of April 2014. In addition, the Series 2011-2, Class A Notes have preferential access to collections arising from the subordination of the Series 2011-2, Class B Notes and the Series 2011-2, Class C Notes equivalent to 16.4% of the current outstanding note balance. The Series 2011-2, Class B Notes also have preferential access to collections arising from the subordination of the Series 2011-2, Class C Notes equivalent to 5.5% of the current outstanding note balance. Total credit enhancement levels available to the Series 2011-2, Class A, Class B and Class C Notes have increased to 31.4%, 20.5% and 15.0%, respectively, measured as a percentage of the outstanding note balance as of April 2014.

(c) For the Series 2012-1 Notes, credit protection is provided by a non-amortizing reserve account that was seeded at the onset of the transaction with an amount equal to $5,327,759, which is equivalent to 3.5% of the outstanding note balance as of April 2014. The Series 2012-1 Notes also benefit from overcollateralization equivalent to 7.9% of the outstanding note balance as of April 2014. In addition, the Series 2012-1, Class A Notes have preferential access to collections arising from the subordination of the Series 2012-1, Class B Notes and the Series 2012-1, Class C Notes equivalent to 9.6% of the current outstanding note balance. The Series 2012-1, Class B Notes also have preferential access to collections arising from the subordination of the Series 2012-1, Class C Notes equivalent to 2.6% of the current outstanding note balance. Total credit enhancement levels available to the Series 2012-1, Class A, Class B and Class C Notes have increased to 21.0%, 14.0% and 11.4%, respectively, measured as a percentage of the outstanding note balance as of April 2014.

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 0.5% of the Aggregate Net Discounted Book Value, then applicable, on the Distribution Date of occurrence.

3. As the Initial Pool Balances were sold to the Trust at discounted values, the yield supplement overcollateralization amounts created contribute to the generation of excess spread that is available to support repayment of the Notes, assuming no losses or requirements to pay the 1.0% replacement servicer fee. The current three-month average excess spread available ranges from 3.3% to 3.7% across these deals.

4. The CCARAT II structures are 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.

5. A strong sponsor, Royal Bank of Canada, which has extensive experience in servicing the automotive market.

6. A well-diversified pool of obligors with respect to geographic representation in Canada.

DBRS monitors the performance of each transaction to identify any deviation from DBRS’s expectation at issuance and to ensure the ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of each publicly rated auto loan portfolio and the Notes are available and updated each month in the Monthly Canada ABS Report (see Related Research).

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Canadian Auto Retail Loan and Lease Securitizations, Legal Criteria for Canadian Structured Finance and Canadian Structured Finance Surveillance Methodology, which are available on our website under Methodologies.