Securitized Term Auto Receivables Trust 2017-1 $750 Million Notes Assigned Ratings
OVERVIEW
- Securitized Term Auto Receivables Trust 2017-1's issuance is an ABS transaction backed by a pool of fixed-rate Canadian dollar-denominated prime auto loan receivables originated by the Bank of Nova Scotia.
- We assigned our ratings to the class A-1, A-2a, A-2b, A-3, and A-4 notes.
- The ratings reflect our view of the transaction's credit enhancement, collateral pool, and payment structure, among other factors.
NEW YORK (S&P Global Ratings) Feb. 15, 2017--S&P Global Ratings today assigned its ratings to Securitized Term Auto Receivables Trust 2017-1's $750 million class A auto loan receivables-backed notes (see list). The note issuance is an asset-backed securities transaction backed by a pool of fixed-rate Canadian dollar-denominated prime auto loan receivables originated by the Bank of Nova Scotia. The ratings reflect:
- The availability of approximately 8.5% credit support (including excess spread) for the class A notes, respectively, based on our stressed break-even cash flow scenarios. This credit support level provides coverage of approximately 5.0x our 1.30%-1.50% expected cumulative net loss range for the class A notes.
- The timely interest and principal payments made under stress cash flow modeling scenarios that are appropriate to the assigned ratings.
- The expectation that under a moderate ('BBB') stress scenario, all else being equal, the ratings on the class A notes will remain within one rating category of the assigned ratings during the first year. This is within the rating tolerance for 'AAA (sf)' rated securities, as outlined in our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010).
- The credit enhancement in the form of subordination, a reserve account, the yield supplement overcollateralization amount, and excess spread.
- The collateral pool and characteristics, historical performance, and our forward-looking view of the Canadian economy.
- The Bank of Nova Scotia's (BNS; A+/Stable/A-1) servicing experience and its loan origination, underwriting, collections, and general operational practices.
- The transaction's payment structure, cash flow mechanics, and legal structure.
- The swap agreement BNS provides, which mitigates the currency and interest rate risk between the Canadian dollar-denominated collateral and U.S. dollar-denominated class A notes. In rating this transaction, we will review the swap documentation for consistency with our counterparty criteria for 'AAA' rated transactions (see "Counterparty Risk Framework Methodology And Assumptions," published June 25, 2013).
RELATED CRITERIA
- Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 02, 2015
- Legal Criteria: Canada Asset Isolation And Special-Purpose Entity Criteria--Structured Finance, Aug. 21, 2013
- Criteria - Structured Finance - General: Global Derivative Agreement Criteria, June 24, 2013
- Legal Criteria: Multiple-Use Special-Purpose Entity Criteria--Structured Finance, May 07, 2013
- Legal Criteria: Asset Isolation And Special-Purpose Entity Criteria--Structured Finance, May 07, 2013
- Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating Canadian Auto Loan ABS, April 26, 2013
- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011
- Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009
RELATED RESEARCH
- Presale: Securitized Term Auto Receivables Trust 2017-1, Feb. 3, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- Province Of Newfoundland and Labrador, Aug. 23, 2016
- Province of Newfoundland and Labrador 'A' Ratings Affirmed On Very Strong Budgetary Flexibility, July 19, 2016
- Province Of New Brunswick, June 29, 2016
- Province Of Saskatchewan, June 29, 2016
- Province Of Saskatchewan Downgraded To 'AA+' From 'AAA' On Average Budgetary Performance; Outlook Negative, June 24, 2016
- Province of Ontario, June 20, 2016
- Province of Alberta, May 27, 2016
- Province Of Alberta Downgraded to 'AA' from 'AA+' On Very Weak Budgetary Performance And High Debt; Outlook Negative, May 19, 2016
- Banking Industry Country Risk Assessment: Canada, March 8, 2016
In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; " Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; " Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, 2009. RATINGS ASSIGNED Securitized Term Auto Receivables Trust 2017-1 Class Rating Type Interest Amount rate (mil. $) A-1 A-1+ (sf) Senior Fixed US$165.000 A-2a AAA (sf) Senior Fixed US$182.000 A-2b AAA (sf) Senior Floating US$81.000 A-3 AAA (sf) Senior Fixed US$235.000 A-4 AAA (sf) Senior Fixed US$87.000 B NR Subordinate Fixed C$37.171 C NR Subordinate Fixed C$31.861 C$--Canadian dollars. NR--Not rated.
Primary Credit Analyst: | Jennie P Lam, New York (1) 212-438-2524; jennie.lam@spglobal.com |
Analytical Manager: | John A Detweiler, CFA, New York (1) 212-438-7319; john.detweiler@spglobal.com |
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