DBRS Morningstar Upgrades Two Ratings and Confirms One Rating on GMF Canada Leasing Trust’s Asset-Backed Notes, Series 2021-1

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

-- Class B Asset-Backed Notes, Series 2021-1 (the Class B Notes) to AAA (sf) from AA (high) (sf)
-- Class C Asset-Backed Notes, Series 2021-1 (the Class C Notes) to AAA (sf) from A (high) (sf)

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

-- Class A-3 Asset-Backed Notes, Series 2021-1 (the Class A-3 Notes; together with the Class B Notes and the Class C Notes, the 2021-1 Notes) at AAA (sf)

The collateral consists of Senior and Subordinated Borrower Notes (the 2021-1 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 2021-1 Borrower Notes, and the proceeds from the 2021-1 Borrower Notes are used to repay the 2021-1 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 represented 164.9%, 135.1%, and 107.6% of the balance of the 2021-1 Notes for the Class A-3, Class B, and Class C Notes, respectively, as of July 2023, and continues to provide sufficient enhancement to support the rating upgrades and confirmation. Credit enhancement consisted of a nonamortizing cash account and overcollateralization equivalent to 3.9% and 67.7%, respectively, of the balance of the 2021-1 Notes as of July 2023, in addition to subordination.

(2) Based on the discount rate applied to the Designated Pool, there is approximately 5.1% (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 2021-1 Notes has been performing well. To date, the trust has reported a cumulative gain of 2 basis points. The used vehicle market continues to be strong following pent-up demand and low inventory. The Designated Pool posted a cumulative residual value gain of 91 basis points as of July 2023.

(4) General Motors Financial of Canada, Ltd (rated BBB (high) with a Stable 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.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

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/416784 (July 4, 2023).

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

The principal methodology applicable to the credit ratings is Master Canadian Structured Finance Surveillance Methodology (June 7, 2023; https://www.dbrsmorningstar.com/research/415503).

Other methodologies referenced in this transaction are listed at the end of this press release.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/410863.

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