S&P: DT Auto Owner Trust 2016-4 $438.51 Million Notes Assigned Preliminary Ratings
The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables.
The preliminary ratings are based on information as of Sept. 26, 2016. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.
The preliminary ratings reflect:The availability of approximately 66.7%, 60.4%, 50.2%, 41.9%, and 37.9% credit support for the class A, B, C, D, and E notes, respectively, based on stressed break-even cash flow scenarios (including excess spread). These credit support levels provide approximately 2.20x, 2.00x, 1.65x, 1.35x, and 1.20x coverage of our expected net loss range of 29.50%-30.50% for the class A, B, C, D, and E notes, respectively. The timely interest and principal payments by the legal final maturity dates made under stressed cash flow modeling scenarios that we deem appropriate for the assigned preliminary ratings. Our expectation that under a moderate ('BBB') stress scenario, the ratings on the class A, B, and C notes would remain within one rating category of our preliminary 'AAA (sf)', 'AA (sf)', and 'A (sf)' ratings, respectively, and the rating on the class D and E notes would remain within two rating categories of our preliminary 'BBB (sf)' and 'BB (sf)' ratings, respectively, during the first year. These potential rating movements are consistent with our credit stability criteria, which outline the outer bound of credit deterioration equal to a one-category downgrade within the first year for 'AAA' and 'AA' rated securities and a two-category downgrade within the first year for 'A' through 'BB' rated securities under moderate stress conditions (see "Methodology: Credit Stability Criteria," published May 3, 2010).The collateral characteristics of the subprime pool being securitized, including a high percentage (approximately 87%) of obligors with higher payment frequencies (more than once a month), which we expect will result in a somewhat faster paydown on the pool. The transaction's sequential-pay structure, which builds credit enhancement (on a percentage-of-receivables basis) as the pool amortizes.