DBRS Morningstar Confirms Ratings on GMF Canada Leasing Trust’s Asset-Backed Notes, Series 2018-1

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following notes (the 2018-1 Notes) issued by GMF Canada Leasing Trust as part of DBRS Morningstar’s continued effort to provide market participants with updates on an annual basis:

-- Class A-3 3.262% Asset-Backed Notes, Series 2018-1 at AAA (sf) (the Class A-3 Notes)
-- Class B 3.794% Asset-Backed Notes, Series 2018-1 at AA (sf) (the Class B Notes)
-- Class C 3.898% Asset-Backed Notes, Series 2018-1 at A (sf) (the Class C Notes)

The collateral consists of Senior and Subordinated Borrower Notes (the 2018-1 Borrower Notes) that are 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 are used to repay the 2018-1 Borrower Notes and the proceeds from the 2018-1 Borrower Notes are used to repay the 2018-1 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.

DBRS Morningstar initially published its outlook on the Coronavirus Disease (COVID-19) pandemic’s impact on key economic indicators for the 2020–22 time frame in April 2020. DBRS Morningstar last updated the macroeconomic scenarios on September 10, 2020, in its “Global Macroeconomic Scenarios: September Update” at https://www.dbrsmorningstar.com/research/366543/dbrs-morningstar-global-macroeconomic-scenarios-september-update. For the rated 2018-1 Notes, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis. The rating confirmations are based on the following factors, each of which includes additional analysis and, where appropriate, additional stresses to expected performance as a result of global efforts to contain the spread of the coronavirus pandemic:

(1) Total credit enhancement available represents 83.0%, 68.0%, and 54.2% of the balance of the 2018-1 Notes for the Class A-3, Class B, and Class C Notes, respectively, and continues to provide sufficient protection to the 2018-1 Notes at their current ratings. Credit enhancement consists of a nonamortizing cash account and overcollateralization equivalent to 1.9% and 34.1% of the balance of the 2018-1 Notes as of July 2020, in addition to subordination.

(2) Based on the discount rate applied to the Designated Pool, there is currently approximately 2.6% (annualized) of excess spread available net of the cost of funds and a monthly servicer fee to offset any collection shortfall on a monthly basis.

(3) The collateral for the 2018-1 Notes has been performing well. To date, cumulative losses amounted to 11 basis points, below DBRS Morningstar’s expectations set at the time of the initial rating. The Designated Pool has posted Cumulative Residual Value gains since issuance and was reported at 1.5% in July 2020.

(4) General Motors Financial of Canada, Ltd (rated BBB with a Negative trend by DBRS Morningstar) has demonstrated its ability to manage successful private securitization transactions supported by auto leases in Canada.

DBRS Morningstar 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 predicated upon the timely receipt of performance information from the related providers.

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:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (August 31, 2020), 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 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.dbrsmorningstar.com or contact us at [email protected].

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