Dominion Bond Rating Service is poised to begin rating more auto deals in 2005. Chris O'Connell, vice president at DBRS, said a number of different auto ABS issuers have been sending pool data for the company to run through its auto credit enhancement tool, and he expects that will result in an increased number of auto deal ratings. O'Connell declined to name specific issuers, but DBRS has rated two auto deals so far, a $2 billion offering from General Motors Acceptance Corp. last year and a $1.5 billion DaimlerChrysler N.A. Holdings deal last month.
Part of what O'Connell hopes will attract issuers to DBRS is its credit enhancement analysis tool that reflects the real-life average prepayment speed of a loan pool. DBRS' models for ABS speeds are based on historical pool performance, and are therefore more reflective of the actual speeds associated with an issuer's securitization history. "We're literally taking into account how the deal performance will occur," said O'Connell. DBRS requires defaults to be netted out from ABS speeds for each rating category to arrive at purely voluntary ABS prepayment speeds. Without taking defaults out of the ABS speed curve, defaults would be double counted in cash-flow exercises.
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