DBRS Confirms Ratings on Canadian Capital Auto Receivables Asset Trust II, Series 2012-1

DBRS Limited (DBRS) has today confirmed its ratings on the following notes issued by Canadian Capital Auto Receivables Asset Trust II, Series 2012-1 (CCARAT II or the Trust) as part of DBRS’s continued effort to provide market participants with updates on an annual basis:

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

The ratings are based on the following factors:

(1) High levels of credit enhancement are available to protect all the Notes. Credit protection to the Notes 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 9.2% of the outstanding note balance as of April 2015. The Notes also benefit from overcollateralization equivalent to 20.7% of the outstanding note balance as of April 2015. 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 25.3% of the current outstanding note balance. The Class B Notes also have preferential access to collections arising from the subordination of the Class C Notes equivalent to 6.9% of the current outstanding note balance. Total credit enhancement levels available to the Class A Notes, Class B Notes and Class C Notes have increased to 55.3%, 36.8% and 29.9%, respectively, measured as a percentage of the outstanding note balance as of April 2015.

(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) A yield supplement overcollateralization amount contributes 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 three-month average excess spread available has hovered around 3.8% over the last year.

(4) A pass-through structured with monthly principal payments, which avoids the risk of refinancing normally associated with term maturities.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.