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

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following notes (the Notes) issued by Securitized Term Auto Receivables Trust 2016-1 as part of DBRS Morningstar’s continued effort to provide timely credit rating opinions and increased transparency to market participants:

-- 1.794% Auto Loan Receivables Backed Notes, Class A-4 (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 is provided by a non-amortizing cash reserve account that represents 4.3% of the outstanding Note balance as of August 2019. In addition, the Class A Notes and Class B Notes benefit from subordination of 52.6% and 24.3%, respectively.

(2) Total credit enhancement levels available to the Class A Notes, measured as a percentage of the outstanding balance of the Notes, have increased from initial levels to 56.9% from 7.0%, 28.6% from 3.5% for the Class B Notes and 4.3% from 0.5% for the Class C Notes.

(3) Monthly excess spread is generated by the Yield Supplement Overcollateralization (YSOC) amount schedule, which is fixed and determines the amount of overcollateralization to be maintained each month. The excess spread 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.

(4) To date, cumulative losses amounted to 26 basis points (bps) and remain well below DBRS Morningstar’s expectations set at the time of the initial rating. The annualized net loss ratio has averaged 32 bps since inception.

(5) The Bank of Nova Scotia (rated AA with a Stable trend by DBRS Morningstar) has considerable experience in banking and consumer lending across multiple product lines.

DBRS Morningstar monitors the performance of each transaction to identify any deviation from DBRS Morningstar’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:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (June 2019), which can be found on dbrs.com under Methodologies & Criteria.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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