Morningstar DBRS Assigns Provisional Credit Ratings to GMF Canada Leasing Trust's Asset-Backed Notes, Series 2025-1

DBRS Limited (Morningstar DBRS) assigned the following provisional credit ratings to the Asset-Backed Notes, Series 2025-1 to be issued by GMF Canada Leasing Trust (GCOLT):

-- (P) AAA (sf) to the Class A-1 Asset-Backed Notes, Series 2025-1, (the Class A-1 Notes)
-- (P) AAA (sf) to the Class A-2 Asset-Backed Notes, Series 2025-1, (the Class A-2 Notes)
-- (P) AAA (sf) to the Class A-3 Asset-Backed Notes, Series 2025-1, (the Class A-3 Notes)
-- (P) AA (sf) to the Class B Asset-Backed Notes, Series 2025-1, (the Class B Notes); collectively with the Class A-1 Notes, the Class A-2 Notes, and the Class A-3 Notes, the Offered Notes)

CREDIT RATING RATIONALE/DESCRIPTION
The Notes will be supported by Senior and Subordinated Borrower Notes (together, the 2025-1 Borrower Notes), which 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.

The collections from the Designated Pool will be used to repay the 2025-1 Borrower Notes, and the proceeds from the 2025-1 Borrower Notes will be used to repay the Series 2025-1 Asset-Backed Notes issued by GCOLT (the Series 2025-1 Notes). No payments of interest or principal will be made on the Subordinated Borrower Note or the Subordinated Trust Note until all principal and interest on the Senior Borrower Notes and the Series 2025-1 Notes has been paid in full. The Subordinated Borrower Note is fully subordinated to the Senior Borrower Note, and the Subordinated Trust Note is fully subordinated to the Series 2025-1 Notes. Collections from the Designated Pool generally include level monthly or biweekly 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.

The Notes will be repaid in sequential order with the Class A-1 Notes repaid first, followed by the repayment of the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, and finally the Subordinated Trust Note. The assigned provisional ratings are based on the full repayment of the Offered Notes by their respective Final Scheduled Payment Dates.

The provisional credit ratings incorporate the following considerations:

(1) High level of credit enhancement (CE)
Initially, hard CE of 19.07%, and 15.22% (as a percentage of Initial Securitization Value (SV)) is available to the Class A Notes, and the Class B Notes, respectively, and consists of a cash reserve not less than 0.50%; overcollateralization (OC) of 6.50%; and subordination of 12.07%, and 8.22% to the Class A Notes, and the Class B Notes, respectively. By using excess monthly collections to repay the outstanding principal of the Series 2025-1 Notes, the OC amount will build to 8.25% of SV at closing. No cash will be released to the Issuer until the target OC amount is met, which is expected by month five, based on scheduled payments (assuming no losses, delinquencies, or prepayments). In addition, an estimated 3.93% (annualized) of excess spread, net of the indicative cost of funds of the Series 2025-1 Notes and monthly servicing fees, is available to offset any collection shortfalls on a monthly basis.

(2) Nonamortizing credit enhancement
The requirement to maintain the cash reserve account and OC amounts at their target levels provides a deleveraging structure as principal on the Series 2025-1 Notes is repaid. Residual values represent the largest risk in closed-end auto lease securitizations, and exposure to such risk is at its highest at the maturities of the lease contracts. Nonamortizing CE ensures that an increasing level of protection is available to offset potential vehicle disposition losses.

(3) Conservative advance rate on residual values
The Base Residual Value of each vehicle in the pool is determined by using the lowest of the contract residual value, Automotive Lease Guide (ALG) value at lease inception, and updated ALG value as of March/April 2025 edition. The reference to the ALG values in setting the Base Residual Value eliminates the funding of potential embedded losses (negative equity in relation to residual values) on the Expected Closing Date, effectively reducing residual value risk in the Designated Pool. The ALG values at origination and updated ALG values have been provided for each of the vehicles in the Designated Pool. As ALG projects its residual values primarily based on auction proceeds, ALG values represent an independent and conservative estimate of the expected wholesale value of the vehicles in the portfolio at maturity.

(4) Strong obligor profile
The obligors of the underlying lease contracts represent high-credit quality customers, evidenced by the WA credit bureau score of 788 (for both the Initial Pool and Upsize Pool). The strong credit profile is also supported by low credit losses, consistently low delinquency levels of GMFC's owned and managed portfolio and 9.6 months (for both the Initial Pool and Upsize Pool) of seasoning.

(5) Securitization experience and parent strength
General Motors Financial of Canada Ltd. (GMFC) has demonstrated its ability to manage successful public and private securitization transactions supported by auto leases in Canada. General Motors Company (GM) and its related entities were confirmed at BBB (high) with a Stable trend on June 20, 2024.

General Motors Financial Company, Inc.'s (GM Financial) credit rating reflects its strategic importance in facilitating the sale of GM vehicles by providing financing to GM customers and dealers. Hence, the Company's success is highly reliant on the Parent's success. Furthermore, GM Financial's credit ratings consider the support agreement with its Parent that requires GM to make a capital contribution should the Company's leverage ratio breach certain established thresholds. Given the high level of interconnectedness between GM and GM Financial, the credit ratings of GM Financial are closely linked and move in tandem with its Parent.

(6) Economic Uncertainty
Since taking office, the Trump administration has announced a series of sweeping tariffs. Specific to the automotive industry, automotive imports to the U.S. are subject to a 25% tariff that became effective as of April 2, 2025. Imports that are compliant with the United States-Mexico-Canada Agreement free-trade agreement only face the 25% tariff on the value of non-U.S. content. In response to the Trump administration's imposition of tariffs, several major U.S. trading partners, including Canada, announced retaliatory tariffs and countermeasures. The tariffs are likely to have both a negative and positive effect on Canadian auto asset-backed securities. The primary impact (i.e., lower demand) on industries that are highly exposed to the U.S. market will likely weigh on those sectors. To the extent there are ensuing job losses, and an economic slowdown, employment and consumer finances will be affected. Conversely, Morningstar DBRS expects--because of supply chain disruption and higher input prices--used collateral values will receive a lot of support, resulting in higher recoveries upon default and lower residual value losses.

Morningstar DBRS' credit rating on the Offered Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are any accrued interest and outstanding principal on the Offered Notes.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk
that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.

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

The principal methodology applicable to the credit rating is Rating Canadian Auto Retail Loan and Lease Securitizations (September 25, 2024), https://dbrs.morningstar.com/research/439988.

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 info-DBRS@morningstar.com.

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

A provisional credit rating is not a final credit rating with respect to the above-mentioned Offered Notes and may change or be different than the final credit ratings assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned Offered Notes is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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://dbrs.morningstar.com/about/methodologies.

-- Operational Risk Assessments for Canadian Structured Finance (March 28, 2025),
https://dbrs.morningstar.com/research/450831/

-- Legal and Derivatives Criteria for Canadian Structured Finance (August 12, 2024),
https://dbrs.morningstar.com/research/437761/

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.