DBRS Publishes Updated Canadian Auto Loan Securitization Methodology

DBRS has today released its updated methodology for rating Canadian auto loan securitizations (Methodology). The publication of this Methodology is part of DBRS’s continued effort to provide market participants with updates and insight into the rationale behind DBRS’s rating opinions.

This Methodology outlines the analytical approach that DBRS takes to rating auto loan securitizations in Canada, and discusses the key elements that DBRS evaluates through qualitative and quantitative analysis. The Methodology also consolidates the various criteria, industry studies and commentaries issued by DBRS since the last methodology for Canadian auto loan securitization was published.

This Methodology is separated into two main sections: first, a detailed review of the various elements unique to auto loan receivables as an asset class in Canada and second, a summary of the core enhancement considerations including the various forms of enhancement acceptable and a brief analysis on the value of excess spread. Key statistics and assumptions are provided in the form of ratings scales used by DBRS to achieve a particular rating for each securitization. Also, a newly created risk matrix has been included at the end of the report to assist the reader in comparing and understanding the major risks identified within the various forms of auto securitizations available in public ABS or through multi-seller conduits.

Each DBRS rating is based upon an analysis of the underlying assets, the transaction parties, the legal and funding structure and the available credit enhancement. These considerations are assessed under various stress scenarios to ensure that commensurate enhancement is available to each rating assigned.

The Methodology is available by clicking on the link below or contacting us at info@dbrs.com.