DBRS Assigns Provisional Ratings to CPS Auto Receivables Trust 2017-C

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes issued by CPS Auto Receivables Trust 2017-C (CPS 2017-C):

-- $105,800,000 Series 2017-C, Class A rated AAA (sf)
-- $35,075,000 Series 2017-C, Class B rated AA (sf)
-- $31,050,000 Series 2017-C, Class C rated A (sf)
-- $27,600,000 Series 2017-C, Class D rated BBB (sf)
-- $25,300,000 Series 2017-C, Class E rated BB (sf)

The ratings are based on DBRS’s review 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, 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 rating addresses the payment of timely interest on a monthly basis and the payment of principal by the legal final maturity date.
-- The capabilities of Consumer Portfolio Services, Inc. (CPS) with regard to originations, underwriting and servicing.
-- DBRS has performed an operational review of CPS and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer.
-- The CPS senior management team has considerable experience and a successful track record within the auto finance industry, having managed the company through multiple economic cycles.
-- The quality and consistency of provided historical static pool data for CPS originations and performance of the CPS auto loan portfolio.
-- The May 29, 2014 settlement of the Federal Trade Commission (FTC) inquiry relating to allegedly unfair trade practices.
-- CPS paid imposed penalties and restitution payments to consumers.
-- CPS has made considerable improvements to the collections process, including management changes, upgraded systems and software as well as implementation of new policies and procedures focused on maintaining compliance.
-- CPS will be subject to ongoing monitoring of certain processes by the FTC.
-- 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 CPS, 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.

The CPS 2017-C transaction represents the 26th securitization completed by CPS since 2010 and will offer both senior and subordinate rated securities. The receivables securitized in CPS 2017-C will be subprime automobile loan contracts secured primarily by used automobiles, light-duty trucks, vans and minivans.

The rating on the Class A Note reflects the 55.00% of initial hard credit enhancement provided by the subordinated notes in the pool (51.75%), the Reserve Account (1.00%) and overcollateralization (2.25%). The ratings on the Class B, Class C, Class D and Class E Notes reflect 39.75%, 26.25%, 14.25% and 3.25% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

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

The principal methodology is Rating U.S. Retail Auto Loan Securitizations, which can be found on dbrs.com 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.