DBRS Morningstar Confirms Ratings on Silver Arrow Canada LP 2018-1 Notes

DBRS Limited (DBRS Morningstar) confirmed its ratings on the 2018-1 Class A-2 Asset Backed Notes (the Class A-2 Notes) and 2018-1 Class A-3 Asset Backed Notes (the Class A-3 Notes; together with the Class A-2 Notes, the Notes) issued by Silver Arrow Canada LP at AAA (sf). The confirmation is part of DBRS Morningstar’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

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 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) Credit protection is provided by overcollateralization and a non-amortizing cash reserve account representing approximately 9.6% and 1.0%, respectively, of the outstanding Note balance as of September 2020. In addition, excess spread, net of cost of funds and a 1.0% servicing fee, is available to offset collection shortfalls on a monthly basis. Current excess spread is approximately 2.9%.

(2) Total credit enhancement has grown to approximately 10.6% from 2.8% at the time of the initial rating.

(3) To date, cumulative losses amount to 17 basis points and remain well below DBRS Morningstar’s expectations set at the time of the initial rating.

(4) Daimler AG (rated BBB (high) with a Stable trend by DBRS Morningstar), the parent company of Mercedes-Benz Financial Services Corporation, remains above investment grade as of August 2020.

DBRS Morningstar monitors the performance of each transaction to identify any deviation from its expectations at issuance and to ensure that 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.dbrsmorningstar.com.

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

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