DBRS Assigns Provisional Ratings to Securitized Term Auto Receivables Trust 2016-1 Notes

DBRS Limited (DBRS) has today assigned provisional ratings to the following notes to be issued by Securitized Term Auto Receivables Trust 2016-1 (START 2016-1):

-- •% Auto Loan Receivables Backed Notes, Class A-1 (the Class A-1 Notes) provisionally rated R-1 (high) (sf)
-- •% Auto Loan Receivables Backed Notes, Class A-2a (the Class A-2a Notes) provisionally rated AAA (sf)
-- Auto Loan Receivables Backed Floating Rate Notes, Class A-2b (the Class A-2b Notes; collectively, with the Class A-2a Notes, the Class A-2 Notes) provisionally rated AAA (sf)
-- •% Auto Loan Receivables Backed Notes, Class A-3 (the Class A-3 Notes) provisionally rated AAA (sf)
-- •% Auto Loan Receivables Backed Notes, Class A-4 (the Class A-4 Notes; collectively, with the Class A-1 Notes, the Class A-2 Notes and Class A-3 Notes, the Class A Notes or Senior Notes) provisionally rated AAA (sf)
-- •% Auto Loan Receivables Backed Notes, Class B (the Class B Notes) provisionally rated AA (sf)
-- •% Auto Loan Receivables Backed Notes, Class C (the Class C Notes; collectively, with the Class B Notes, the Subordinated Notes) provisionally rated A (sf)

The Senior Notes and Subordinated Notes (collectively, the Notes) will be supported by a portfolio of prime retail auto loan contracts originated by the Bank of Nova Scotia and secured by new and used light trucks (including sport-utility vehicles, crossover-utility vehicles and minivans) and passenger cars (the Portfolio of Assets).

Repayment of the Notes will be made from collections from the Portfolio of Assets, which generally include scheduled monthly loan payments, prepayments as well as proceeds from vehicle sales in the case of defaults. Principal repayment on the Notes will be sequential in the order of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes. The provisional ratings assigned are based on the full repayment of the Notes by their respective Final Scheduled Payment Dates.

The provisional ratings incorporate the following considerations:

(1) Available Credit Enhancement
-- Initial subordination of 6.50% and 3.00% (both of Initial Adjusted Pool Balance) to the Class A Notes and Class B Notes, respectively, cash of 0.50% (of Initial Pool Balance) and excess spread of approximately 3.90% (annualized).
-- Non-amortizing enhancement provides a deleveraging structure.

(2) Transaction Structure
-- Excess collections are not released to the Seller unless the Yield Supplement Overcollateralization Amount is maintained.

(3) Manufacturer and Model Diversity
-- The Portfolio of Assets consists of over 300 vehicle models from over 15 different manufacturers.

(4) Obligor Profile
-- The obligors of the underlying lease contracts represent high credit quality customers with a weighted-average FICO score of 777.6.

(5) Operational Strength and Experience of Seller
-- Seller is highly rated by DBRS at AA with Negative trend and has considerable experience in banking and consumer lending across multiple product lines.

DBRS cash flow analysis includes a conservative base-case cumulative net loss estimate, consideration for the seasoning in the Portfolio of Assets and prepayments. Available credit enhancement is able to withstand the stresses at levels commensurate with the assigned ratings.

Notes:
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 Loan and Lease Securitizations, Legal Criteria for Canadian Structured Finance and Derivatives Criteria for Canadian Structured Finance, which can be found on our website under Methodologies.

The full report providing additional information and analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.