DBRS Finalizes Provisional Rating on CPS Auto Securitization Trust 2018-1

DBRS, Inc. (DBRS) finalized its provisional rating on the following class of notes issued by CPS Auto Securitization Trust 2018-1:

-- $40,000,000 Class A Notes rated BB (low) (sf)

The rating is based on a review by DBRS of the following analytical considerations:

-- Transaction capital structure, proposed rating and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, amounts held in the reserve fund and excess cash flows.
-- 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 and the payment of principal by the legal final maturity date.
-- Pursuant to the terms of the transaction, interest which is due but not paid on any payment date will be payable on the next payment date with interest on such unpaid amounts.
-- Failure to pay interest on any payment date will not constitute an event of default.
-- The consistent performance of the DBRS-rated Underlying Securitization Transactions and the stability and migration of outstanding ratings.
-- Pursuant to the DBRS Internal Assessment Global Policy, DBRS has relied on public ratings issued by other credit rating agencies for the assessment of certain tranches of Underlying Securitization Transactions not rated by DBRS.
-- DBRS has excluded CPS Auto Receivables Trust 2013-C and CPS Auto Receivables Trust 2014-A in the initial rating analysis. Pursuant to the DBRS methodology “Rating U.S. Structured Finance Transactions,” generally, the highest rating assigned in a residual re-securitization may not exceed the lowest outstanding rating in the pool of primary transactions.
-- The capabilities of Consumer Portfolio Services, Inc. (CPS) with regard to originations, underwriting and servicing of the fixed-rate subprime motor vehicle retail installment contracts and installment loan agreements that secure each Initial Underlying Securitization Transaction.
-- 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, performance of the CPS auto loan portfolio and performance of the Underlying Securitization Transactions.
-- The legal structure and presence of legal opinions that address the true sale of the collateral 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 collateral and the consistency with the DBRS “Legal Criteria for U.S. Structured Finance.”

The rating on the Class A Notes reflects the current credit enhancement of 72.85% with initial hard credit enhancement of 74.73% provided by the Reserve Account (0.32%) and Measured Credit Enhancement (74.41%). Additional credit support may be provided from excess cash flow available in the structure.

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

The principal methodologies are Rating U.S. Structured Finance Transactions (December 2017) and Rating U.S. Retail Auto Loan Securitizations (July 2016), which can be found on dbrs.com under Methodologies.

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

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.