DBRS Confirms Rating on Liquidity Agreement Supporting HK Extended 2014-1 within Institutional Secured Funding

DBRS, Inc. (DBRS) has today confirmed the AAA rating on the Liquidity Agreement (LA) dated August 13, 2014, supporting HK Extended 2014-1 within Institutional Secured Funding. The rating addresses the timely payment of interest and ultimate payment of principal. The rating also addresses a full-term amortizing loan facility secured by a discrete pool of auto loans originated and serviced by a captive finance company (the Company).

Consistent with DBRS’s “Rating U.S. Retail Auto Loan Securitizations” methodology and as part of its operational risk review of an originator and servicer, DBRS typically performs an on-site visit or has a call with the originator and servicer. For this transaction, DBRS was asked to provide the rating by a liquidity provider rather than the servicer or an affiliate. This resulted in limited access to the Company; consequently, no on-site review or call was conducted by DBRS. DBRS deems the operational capacity to be acceptable. Potential risks include not conducting an on-site review or call, which is mitigated by a number of factors, including:

(1) The Company is rated investment grade by two Nationally Recognized Statistical Rating Organizations.

(2) The DBRS Financial Institutions Group has reviewed the Company’s financials and provided a private rating to the DBRS analytical team.

(3) The Company has sponsored numerous securitizations of auto loans supported by its own originated collateral for over 20 years and serviced transactions over the last 14 years. DBRS deems the Company to be a very experienced originator and servicer, which is demonstrated by strong performance on its outstanding transactions.

(4) DBRS held discussions with the liquidity provider regarding the Company’s origination and servicing capabilities and reviewed credit materials that were prepared in connection with this transaction.

Notes:
The principal methodologies are Asset-Backed Commercial Paper Criteria Report: U.S. ABCP Conduits and Rating U.S. Retail Auto Loan Securitizations, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did not participate in the rating process. DBRS did not have access to the accounts and other relevant internal documents of the rated entity or its related entities.