DBRS Morningstar Confirms Rating on GMF Leasing Warehouse Trust 2016-B

DBRS, Inc. (DBRS Morningstar) confirmed its AA (sf) rating on the Floating Rate Asset Backed Notes (the Notes) issued by GMF Leasing Warehouse Trust 2016-B (the Issuer).

DBRS Morningstar based the confirmation on an increase in the facility size, an increase in the minimum credit enhancement, and the extension of the commitment termination date.

The rating rationale includes the following key analytical considerations:

-- The transaction’s capital structure, rating, and form and sufficiency of available credit enhancement.

-- Quality and experience of the Issuer’s management team.

-- The transaction parties’ capabilities with regard to originations, underwriting ,and servicing and the financial strength of General Motors Financial Company, Inc. (GMF; rated BBB (high) by DBRS Morningstar and the rating is Under Review with Negative Implications).

-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.

-- The legal structure and presence of legal opinions that address the true sale of the Notes to the Issuer, the nonconsolidation of the special-purpose vehicle with GMF, that the trust has a valid first-priority security interest in the assets, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance” methodology.

-- DBRS Morningstar's assessment of how collateral performance could deteriorate because of macroeconomic stresses brought about by the Coronavirus Disease (COVID-19) pandemic. As the pandemic spreads and its consequences unfold, it is difficult to anticipate the ultimate impact on the variables that drive credit quality. In the context of this highly uncertain environment and in the interest of transparency, DBRS Morningstar released a set of forward-looking macroeconomic scenarios for select economies related to the coronavirus in a commentary titled, “Global Macroeconomic Scenarios: Implications for Credit Ratings,” on April 16, 2020. DBRS Morningstar uses the moderate and adverse scenarios in the context of its rating analysis, with the moderate scenario serving as the primary anchor for current ratings and the adverse scenario serving as a benchmark for sensitivity analysis.

-- DBRS Morningstar’s moderate scenario, which assumes some success in containment within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020. This moderate scenario primarily considers two economic measures: declining GDP growth and increased unemployment levels for the year.

-- The collateral performance to date and DBRS Morningstar's assessment of future performance, including upward revisions to the expected loss assumptions in consideration of the expected unemployment levels in the moderate scenario.

--Additional rating considerations related to the decline in used-vehicle values that could affect the residual values of vehicles coming off lease.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
The principal methodology is the DBRS Master U.S. ABS Surveillance Methodology (July 31, 2019), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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.

This rating is endorsed by DBRS Ratings Limited (DBRS Morningstar) for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on this transaction took place on May 24, 2019.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Lead Analyst: Christopher O’Connell, Senior Vice President, U.S. ABS – Global Structured Finance
Rating Committee Chair: Christopher D’Onofrio, Managing Director, U.S ABS – Global Structured Finance
Initial Rating Date: June 1, 2016

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

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DBRS Master U.S. ABS Surveillance Methodology (July 31, 2019) https://www.dbrsmorningstar.com/research/348707/dbrs-master-us-abs-surveillance-methodology