Securitized Term Auto Receivables Trust 2017-1 $750 Million Notes Assigned Ratings

Stocks and Financial Services Press Releases Thursday February 16, 2017 08:58
NEW YORK--16 Feb--S&P Global Ratings

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).

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