DBRS Morningstar Confirms Ratings on Securitized Term Auto Receivables Trust 2019-CRT

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Auto Loan Receivables Backed Notes, Classes B, C, and D (collectively, the Subordinated Notes) issued by Securitized Term Auto Receivables Trust 2019-CRT (the Trust). The confirmation is part of DBRS Morningstar’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

The Trust also issued Auto Loan Receivables Backed Notes, Class A (the Class A Notes; collectively with the Subordinated Notes, the Notes), which are not rated. The Notes are supported by a portfolio of prime retail auto loan contracts originated by The Bank of Nova Scotia (rated AA with a Stable trend by DBRS Morningstar) and secured by new and used light trucks (including sport-utility vehicles, crossover-utility vehicles, and minivans) and passenger cars (the Portfolio of Assets).

Repayment of the Notes will be made from collections from the Portfolio of Assets, which generally include scheduled monthly loan payments, prepayments, and proceeds from vehicle sales in the case of defaults. Principal repayment on the Notes will be made pro rata until the occurrence of a Sequential Principal Payment Trigger Event, after which the Notes will be paid sequentially in the order of the Class A Notes, Class B Notes, Class C Notes, and Class D Notes. The ratings on the Subordinated Notes are based on their full repayment by the Final Scheduled Payment Date.

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 Subordinated 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:

-- Credit protection is provided by a nonamortizing cash reserve account funded at closing representing approximately 0.42% of the outstanding Note balance as of October 2020 as well as subordination of 6.50% and 2.75% (as a percentage of the Note balance) to the Class B Notes and Class C Notes, respectively.

-- Excess spread net of cost of funds and replacement servicer fees is available to offset collection shortfalls on a monthly basis. As of October 2020, excess spread was equal to approximately 4.55% (annualized).

-- To date, cumulative losses amount to 6 basis points and remain well below DBRS Morningstar’s expectations set at the time of the initial rating.

-- The Bank of Nova Scotia has a strong and well-diversified banking franchise with a long history in banking and consumer lending across multiple product lines.

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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577