DBRS Confirms Ratings on Securitized Term Auto Receivables Trust 2016-1 Notes

DBRS Limited (DBRS) confirmed the ratings on the following notes issued by Securitized Term Auto Receivables Trust 2016-1 as part of DBRS’s continued effort to provide market participants with updates on an annual basis:

-- AAA (sf) on the 1.284% Auto Loan Receivables Backed Notes, Class A-2a (the Class A-2a Notes)
-- AAA (sf) on the Auto Loan Receivables Backed Floating Rate Notes, Class A-2b (collectively, with the Class A-2a Notes, the Class A-2 Notes)
-- AAA (sf) on the 1.524% Auto Loan Receivables Backed Notes, Class A-3 (the Class A-3 Notes)
-- AAA (sf) on the 1.794% Auto Loan Receivables Backed Notes, Class A-4 (collectively, with the Class A-2 Notes and Class A-3 Notes, the Class A Notes)
-- AA (sf) on the 2.097% Auto Loan Receivables Backed Notes, Class B (the Class B Notes)
-- A (sf) on the 2.997% Auto Loan Receivables Backed Notes, Class C (the Class C Notes; collectively, with the Class A Notes and the Class B Notes, the Notes)

The ratings are based on the following factors:

(1) High Levels of Credit Enhancement
Credit protection to the Notes is provided by a non-amortizing cash reserve account that was seeded with 0.5% of the Initial Pool Balance and represents 0.9% of the Notes outstanding balance as at August 2017. In addition, the Class A Notes have preferential access to collections arising from the subordination of the Class B and Class C Notes equivalent to 10.9% of the outstanding amount of the Notes as at August 2017. The Class B Notes have preferential access to collections equivalent to 5.0% of the outstanding amount of the Notes. Total credit enhancement levels available to the Class A, Class B and Class C Notes have increased to 11.8%, 5.9% and 0.9%, respectively, measured as a percentage of the outstanding Notes balance as at August 2017.

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

(3) Strong Performance
The annualized net loss ratio has averaged 0.07% since inception. To date, cumulative losses are below DBRS expectations set at the time of the initial ratings, amounting to 4 basis points.

(4) Operational Strength and Experience of the Seller
The 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 monitors the performance of each transaction to identify any deviation from DBRS’s expectation at issuance and to ensure the ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of each publicly rated auto loan portfolio and the Notes are available and updated each month in the Monthly Canadian ABS Report.

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 principal methodologies are Master Canadian Structured Finance Surveillance Methodology (May 2017), Rating Canadian Auto Retail Loan and Lease Securitizations (October 2017), Derivatives Criteria for Canadian Structured Finance (July 2017) and Legal Criteria for Canadian Structured Finance (July 2017), which are available 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.