DBRS Assigns Provisional Ratings to Prestige Auto Receivables Trust 2016-2

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes issued by Prestige Auto Receivables Trust 2016-2 (2016-2):

-- $54,000,000 Class A-1 rated R-1 (high) (sf)
-- $129,310,000 Class A-2 rated AAA (sf)
-- $32,820,000 Class A-3 rated AAA (sf)
-- $33,250,000 Class B rated AA (sf)
-- $48,030,000 Class C rated A (sf)
-- $37,870,000 Class D rated BBB (sf)
-- $8,320,000 Class E rated BB (sf)

The ratings are based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization (OC), subordination, amounts held in the reserve fund and excess spread. Credit enhancement levels are sufficient to support the DBRS-projected expected cumulative net loss assumption under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the payment of timely interest on a monthly basis and the payment of principal by the legal final maturity date.
-- The transaction parties’ capabilities with regard to originations, underwriting and servicing.
-- DBRS has performed an operational review of Prestige Financial Services, Inc. (Prestige), and considers the entity to be an acceptable originator and servicer of subprime automobile loan receivables with an acceptable backup servicer.
-- The Prestige management team has extensive experience. It has been lending to the subprime auto sector since 1994 and has considerable experience lending to Chapter 7 and 13 obligors.
-- The credit quality of the collateral and performance of Prestige’s auto loan portfolio.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with Prestige, that the trust has a valid first-priority security interest in the assets and the consistency with DBRS’s “Legal Criteria for U.S. Structured Finance” methodology.

This is the 18th transaction Prestige has issued in the asset-backed securities (ABS) term or conduit market since 1996. All term ABS transactions issued between 2001 and 2007 were wrapped by a monoline insurer while all term ABS transactions issued since 2009 were senior-subordinate transactions. All of the transactions, except for the PART 2013-1, 2014-1, 2015-1 and 2016-1 term securitizations, have paid off in full without experiencing an Event of Default.

Initial Class A credit enhancement of 42.50% will include a reserve account (1.00% of the initial aggregate principal balance, funded at inception and non-declining), OC of 7.00% of the initial pool balance and subordination of 34.50%. Initial Class B credit enhancement of 33.50% includes the reserve account of 1.00%, OC of 7.00% and subordination of 25.50%. Initial Class C credit enhancement of 20.50% includes the reserve account of 1.00%, OC of 7.00% and subordination of 12.50%. Initial Class D credit enhancement of 10.25% includes the reserve account 1.00%, OC of 7.00% and subordination of 2.25%. Initial Class E credit enhancement of 8.00% is from the reserve account of 1.00% and OC of 7.00%.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating U.S. Retail Auto Loan Securitizations, which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Please see attached appendix for additional information regarding sensitivity of assumptions used in the rating process.

The full report providing additional 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.