DBRS Confirms Ratings on GMF Canada Leasing Trust’s Asset-Backed Notes, Series 2017-1

DBRS Limited (DBRS) confirmed its ratings on the following notes (the 2017-1 Notes) issued by GMF Canada Leasing Trust (the Trust) as part of DBRS’s continued effort to provide market participants with updates on an annual basis:

-- Class A-1 1.860% Asset-Backed Notes, Series 2017-1 rated AAA (sf) (the Class A-1 Notes)
-- Class A-2 2.263% Asset-Backed Notes, Series 2017-1 rated AAA (sf) (the Class A-2 Notes)
-- Class A-3 2.465% Asset-Backed Notes, Series 2017-1 rated AAA (sf) (the Class A-3 Notes)
-- Class B 2.785% Asset-Backed Notes, Series 2017-1 rated AA (sf) (the Class B Notes)
-- Class C 2.896% Asset-Backed Notes, Series 2017-1 rated A (sf) (the Class C Notes)

The collateral consists of Senior and Subordinated Borrower Notes (the 2017-1 Borrower Notes) that is supported by a first-priority security interest in a portfolio of closed-end lease contracts of new automobiles, light-duty trucks and utility vehicles (the Designated Pool). The lease contracts were originated through authorized General Motors dealers in Canada.

Collections from the Designated Pool will be used to repay the 2017-1 Borrower Notes and the proceeds from the 2017-1 Borrower Notes will be used to repay the 2017-1 Notes. Collections from the Designated Pool 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 from the Designated Pool.

The 2017-1 Notes are repaid in sequential order, with the Class A-1 Notes being repaid first, followed by the repayment of the Class A-2 Notes, the Class A-3 Notes, the Class B Notes and, finally, the Class C Notes.

The ratings are based on the following factors:

(1) High levels of credit enhancements are available to protect all the 2017-1 Notes. Credit protection is provided by a non-amortizing cash account that was funded at closing in an amount equivalent to 0.5% of the initial securitization value. The cash amount represents 0.84% of the balance of the 2017-1 Notes as of August 2018. In addition, the 2017-1 Notes benefit from an overcollateralization (OC) amount that built to 8.75% from 7.0% of the initial securitization value and is required to be maintained at the target level. The OC represents 14.7% of the balance of the 2017-1 Notes as of August 2018. Total credit enhancement available represents 28.0%, 21.5% and 15.6% of the balance of the 2017-1 Notes, for Class A, Class B and Class C, respectively.

(2) The initial pool balance was sold to the Trust at discounted values and as such, there is excess spread available net of the cost of funds of the offered notes and a monthly servicer fee of approximately 5.2% (annualized) as of August 2018, which is available to offset any collection shortfall on a monthly basis.

(3) Cumulative losses are below DBRS’s expectations set at the time of the initial rating. As of August 2018, the cumulative loss ratio was 13 basis points (bps). Since issuance, the pool has posted Cumulative Residual Value gains and as of August 2018, it was reported at 14 bps.

(4) General Motors Financial of Canada, Ltd has demonstrated its ability to manage successful private securitization transactions supported by auto leases in Canada. General Motors and its related entities are rated BBB with Positive trends and were confirmed by DBRS in April 2018.

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

Notes:
The principal methodologies are Master Canadian Structured Finance Surveillance Methodology (May 2018), Rating Canadian Auto Retail Loan and Lease Securitizations (October 2017) and Legal Criteria for Canadian Structured Finance (July 2018), which can be found on dbrs.com under Methodologies.

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 under Related Documents or by contacting us at info@dbrs.com.

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.

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