DBRS Confirms Ratings of Securitized Term Auto Receivables Trust 2016-1

DBRS Limited (DBRS) confirmed the ratings on the following notes (the 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:

-- 1.524% Auto Loan Receivables Backed Notes, Class A-3 (the Class A-3 Notes) at AAA (sf)
-- 1.794% Auto Loan Receivables Backed Notes, Class A-4 (the Class A-4 Notes; collectively, with the Class A-3 Notes, the Class A Notes) at AAA (sf)
-- 2.097% Auto Loan Receivables Backed Notes, Class B (the Class B Notes) at AA (sf)
-- 2.997% Auto Loan Receivables Backed Notes, Class C (the Class C Notes) at A (sf)

The ratings are based on the following factors:

(1) High levels of credit enhancement are available to protect all the Notes. 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 1.7% of the Notes outstanding balance as of August 2018. In addition, the Class A Notes have preferential access to collections arising from the subordination of the Class B Notes and the Class C Notes equivalent to 21.5% of the outstanding amount of the Notes as of August 2018. The Class B Notes have preferential access to collections equivalent to 9.9% 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 23.2%, 11.7% and 1.7%, respectively, measured as a percentage of the outstanding Notes balance as of August 2018.

(2) Monthly excess spread is generated in the transaction by the Yield Supplement Overcollateralization (YSOC) amount schedule which is fixed and determines the amount of overcollateralization that needs to be maintained each month. The YSOC amounts created contribute to the generation of excess spread that is available to support the repayment of the Notes. The transaction waterfall ensures that no excess collections will be released to the Seller unless the YSOC amount is maintained.

(3) The annualized net loss ratio has averaged 0.17%, since inception. As of August 2018, cumulative losses are below DBRS’s expectations set at the time of the initial rating, amounting to 15 basis points.

(4) The Bank of Nova Scotia (rated AA with a Stable trend by DBRS) 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 available at www.dbrs.com.

Notes:
The principal methodologies are Master Canadian Structured Finance Surveillance Methodology (May 2018), Rating Canadian Auto Retail Loan and Lease Securitizations (October 2018), Derivatives Criteria for Canadian Structured Finance (July 2018) and Legal Criteria for Canadian Structured Finance (July 2018), which are available 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.