Morningstar DBRS Confirms Credit Ratings on Silver Arrow Canada LP Series 2022-1 Notes

DBRS Limited (Morningstar DBRS) confirmed the credit ratings on the following notes issued by Silver Arrow Canada LP as part of Morningstar DBRS’ continued effort to provide market participants with updates on an annual basis:

-- 2022-1 Class A-2 Asset Backed Notes (the Class A-2 Notes) at AAA (sf)
-- 2022-1 Class A-3 Asset Backed Notes (the Class A-3 Notes; together with the Class A-2 Notes, the Notes) at AAA (sf)

The credit rating confirmations are based on the following factors as of December 2023:

(1) Credit enhancement (CE) is available to protect the Notes. Credit protection is provided by overcollateralization and a nonamortizing cash reserve account representing approximately 6.4% and 0.6%, respectively, of the outstanding Note balance. In addition, excess spread is available to offset collection shortfalls on a monthly basis. Current excess spread is approximately 3.9%, before any assumed provision for replacement servicer fees.

(2) Total CE has grown to approximately 7.0% from 2.8% at the time of the initial rating.

(3) To date, cumulative losses remain low and have amounted to 8 basis points of the Initial Pool Balance and is below Morningstar DBRS’ expectations set at the time of the initial rating.

(4) Mercedes-Benz Group AG (formerly Daimler AG) (rated A with a Stable trend by Morningstar DBRS), the parent company of Mercedes-Benz Financial Services Corporation, remains above investment grade as of November 2023.

Morningstar DBRS monitors the performance of each transaction to identify any deviation from its expectations at issuance and to ensure that the credit 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 https://dbrs.morningstar.com/.

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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.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 the Master Canadian Structured Finance Surveillance Methodology (June 7, 2023; https://dbrs.morningstar.com/research/415503 ).

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

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.
Morningstar DBRS 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
DBRS Tower, 181 University Avenue, Suite 700
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://dbrs.morningstar.com/about/methodologies.

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

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