Bank of Nova Scotia (Scotiabank) and BMW of Canada have each released their first securitizations of Canadian loans and leases for the year, both in U.S.-dollar currency.

Scotiabank’s Securitized Term Auto Receivables Trust 2017-1 (SSTRT) will issue $500 million in U.S.-denominated senior notes across four tranches: a $110 million A-1 money market tranche, a $175 million Class A-2 series split between two-year fixed- and floating-rate notes; a three-year $157 million tranche of Class A-3 bonds and a Class A-4 series of notes totaling $58 million that are due in 2021.

All of the multi-year notes have preliminary triple-A structured finance ratings from Standard & Poor’s and Moody’s Investors Service. The short-term one-year notes are rated ‘A-1’/’P-1’, by S&P and Moody’s, respectively.  

The transaction also includes two subordinate classes (B and C series) of unrated notes being issued in Canadian dollars totaling $46.04 million (US$35.38 million).

The bonds are secured by the prime-quality retail loan contract receivables from prime loans issued by Scotiabank), with an outstanding principal balance of CAN$752.68 million (US$578.34 million). The deal is the second that SSTRT transaction that Scotiabank has issued through the trust.

Moody’s has estimated only a 1.10% expected cumulative loss to portfolio comprised of 37,664 prime-quality retail loan-contract receivables from consumers with an average FICO score of 781. The loans, with an average seasoning of 17 months, include weighted original terms of 63 months, shorter than average for many recent Canadian auto trust issuances.

The weighted average APR is only 2.43%, a lower-than-average rate for a Canadian auto securitization supported in large measure by manufacture low-rate incentive programs – 68% of the loans in the portfolio are subvented, according to Moody’s.

Supporting the U.S. notes is a yield-supplement overcollateralization of 4.6% (or $44.7 million), providing 3.9% of gross annualized excess spread. There is also a non-declining reserve fund of 0.53%, per Moody’s.

Moody’s considered Scotiabank’s indirect lending across multiple franchised dealerships a credit strength to the transaction, as opposed to a captive finance operation; but did express concern about the higher proportion of used vehicles (28.23%) in the pool, exposing the portfolio to collateral with historically higher default and delinquency rates.

Scotiabank, Barclays, Citigroup and JPMorgan are underwriting the transaction.

BMW Canada Auto Trust 2017-1 (BMWCA) is the third term securitization of retail auto lease contracts originated by BMW Canada’s dealer network. It’s previous deals were in 2015 and 2016.

BMWCA 2017-1 features will issue $400 million in three senior U.S.-dollar denominated note tranches: a $180 million Class A-1, two year series; a $140 million class A-2 series due 2020; and a Class A-3 series totaling $80 million in four-year notes.

Both DBRS and Moody’s have issued preliminary triple-A ratings to all three tranches.

The collateral consists entirely of new vehicles leased to 11,336 high-quality lessors with an average FICO of 799. The vehicles have an average securitization value of $41,759.

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