DBRS Confirms Ratings on BMW Canada Auto Trust 2015-1 Notes

DBRS Limited (DBRS) has today confirmed its ratings on the following notes issued by BMW Canada Auto Trust (the Trust) as part of DBRS’s continued effort to provide market participants with updates on an annual basis:

-- Class A-2 Notes, Series 2015-1 at AAA (sf) (the Class A-2 Notes)
-- Class A-3 Notes, Series 2015-1 at AAA (sf) (the Class A-3 Notes; collectively with the Class A-2 Notes, the Notes)

The Notes are supported by a portfolio of retail closed-end lease contracts and related rights secured by new BMW-branded passenger cars and sport-activity vehicles (the Portfolio of Assets). The lease contracts were originated by authorized BMW dealers in Canada.

Repayment of the Notes is being made from collections from the Portfolio of Assets, which generally include scheduled monthly lease payments (including residual value payments in the case of customer-retained vehicles) as well as proceeds from vehicle sales either at the end of the lease term or earlier in the case of prepayments and defaults. Proceeds from excess mileage and wear-and-tear charges, if any, also form part of the collections used to repay the Notes.

The Notes are being repaid in sequential order. The Class A-1 Notes were fully repaid on September 20, 2016 and the Class A-2 Notes are currently being repaid, which will be followed by the Class A-3 Notes. The ratings are based on the full repayment of the Notes by their respective Final Scheduled Payment Dates.

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 cash account that was funded at closing in an amount equivalent to 0.25% of the initial securitization value. The cash amount represents 0.41% of the current securitization value as of September 2016. In addition, the Notes benefit from an overcollateralization (OC) amount that built to 18.5% of the initial securitization value from 16.5% and it is required to be maintained at that target level. The OC represents 30.19% of the current securitization value as of September 2016.

(2) As the initial pool balances were sold to the Trust at discounted values, there is excess spread above the cost of funds and potential monthly replacement servicer fees of approximately 5.2% (annualized) as of September 2016, which is available to offset any collection shortfall on a monthly basis.

(3) To date, cumulative losses are below DBRS expectations set at the time of the initial rating, amounting to 16.0 basis points of the initial securitization value while the transaction has benefited from cumulative residual value gains equivalent to 4.05% of the initial securitization value.

(4) The Seller (BMW Canada Inc.) and its parent, BMW AG (BMW or the Company), were confirmed at “A” with a Positive trend by DBRS on June 17, 2016. The corporate rating confirmations recognize the Company’s strong earnings performance in the last four years and its strong business profile as the world’s leading automotive manufacturer in the premium vehicle segment. As a subsidiary of BMW, BMW Canada Inc. benefits from its parent’s strong financial standing and global presence, allowing it to leverage the experience and expertise of BMW’s other financial services companies worldwide to ensure sound and consistent underwriting standards and efficient servicing operations.

DBRS monitors the performance of each transaction to identify any deviation from its expectation at issuance and to ensure that the ratings remain appropriate. The review is predicated on the timely receipt of performance information from the related providers.

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 Methodology (May 2016), Rating Canadian Auto Retail Loan and Lease Securitizations (October 2016) and Legal Criteria for Canadian Structured Finance (July 2016), which can be found 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.