DBRS Morningstar Upgrades Two Ratings and Confirms Three Ratings on GMF Canada Leasing Trust’s Asset-Backed Notes, Series 2020-1

DBRS Limited (DBRS Morningstar) upgraded its ratings on the following notes issued by GMF Canada Leasing Trust:

-- Class B Asset-Backed Notes, Series 2020-1 (the Class B Notes) to AA (high) (sf) from AA (sf)
-- Class C Asset-Backed Notes, Series 2020-1 (the Class C Notes) to A (high) (sf) from A (sf)

In addition, DBRS Morningstar confirmed its ratings on the following notes:

-- Class A-1 Asset-Backed Notes, Series 2020-1 (the Class A-1 Notes) at AAA (sf)
-- Class A-2 Asset-Backed Notes, Series 2020-1 (the Class A-2 Notes) at AAA (sf)
-- Class A-3 Asset-Backed Notes, Series 2020-1 (collectively, with the Class A-1 Notes and the Class A-2 Notes, the Class A Notes) at AAA (sf)

The collateral consists of Senior and Subordinated Borrower Notes (the 2020-1 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 2020-1 Borrower Notes and the proceeds from the 2020-1 Borrower Notes are used to repay the 2020-1 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.

(1) Total credit enhancement available represents 36.1%, 29.6%, and 23.7% of the balance of the 2020-1 Notes for the Class A, Class B, and Class C Notes, respectively, and continues to provide sufficient enhancement to support the rating upgrades and confirmations. Credit enhancement consists of a non-amortizing cash account and overcollateralization equivalent to 1.3% and 14.7% of the balance of the 2020-1 Notes as of July 2021, in addition to subordination.

(2) Based on the discount rate applied to the Designated Pool, there is approximately 4.2% (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 2020-1 Notes has been performing well. To date, cumulative losses amounted to five basis points (bps), in line with DBRS Morningstar’s expectations set at the time of the initial rating. The Designated Pool has posted a Cumulative Residual Value gain of 20 bps as of July 2021.

(4) General Motors Financial of Canada, Ltd (rated BBB with a Positive 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (June 7, 2021), 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 DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario for this rating action. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/384150/baseline-macroeconomic-scenarios-for-rated-sovereigns and https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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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