Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report)

Transcription

1 toronto new york chicago london paris frankfurt Commentary Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) june 2007

2 CONTACT INFORMATION Cherry Allen Vice President U.S. Structured Finance Tel Chris O Connell Senior Vice President U.S. Structured Finance RMBS/ABS Tel coconnell@dbrs.com DBRS is a full-service credit rating agency established in Privately owned and operated without affiliation to any financial institution, DBRS is respected for its independent, third-party evaluations of corporate and government issues, spanning North America, Europe and Asia. DBRS s extensive coverage of securitizations and structured finance transactions solidifies our standing as a leading provider of comprehensive, in-depth credit analysis. All DBRS ratings and research are available in hard-copy format and electronically on Bloomberg and at DBRS.com, our lead delivery tool for organized, Web-based, up-to-the-minute information. We remain committed to continuously refining our expertise in the analysis of credit quality and are dedicated to maintaining objective and credible opinions within the global financial marketplace.

3 Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) TABLE OF CONTENTS Overview 4 Class Summary and Current Enhancement Analysis 4 Loss Analysis 5 DBRS Original Base Case Loss and Loss Timing 5 Estimate of Expected Remaining Loss 5 Tranche Loss Coverage Analysis 6 Historical Performance of Collateral 7 Delinquency History 7 Interest Coverage 8 Principal Pass-Through 8 Excess Spread 8 Appendix: Capital Auto Receivables Asset Trust Performance Analytics Report 9 3

4 Auto Sector Surveillance and DBRS s Auto Performance Analytics Report Overview In, DBRS launched its web-based Auto Performance Analytics Reports (Auto PARs), monthly performance reports for all DBRS-rated U.S. auto asset-backed securities (ABS) transactions. These surveillance reports summarize key deal performance information as of the most recent transaction reporting period and include the following: Class summary and current enhancement analysis Loss analysis Historical performance of collateral In addition to providing historical performance metrics, each month current enhancement levels are tested against various expectations of remaining losses. DBRS Auto PARs are available for free on the DBRS website at the following link: Class Summary and Current Enhancement Analysis The Auto PARs provide a performance assessment of a transaction and summarize current credit enhancement available for each tranche. Sources of hard credit enhancement at issuance and for the current period (typically subordination, reserve accounts and overcollateralization) are individually summarized. Current period hard credit enhancement levels are aggregated for each class and are displayed relative to original enhancement levels. This comparison provides insight into the shifts in tranche enhancement levels as the structure de-leverages. Class Summary Capital Auto Receivables Asset Trust Original Balance Current Balance Coupon Final Maturity Original Rating (as of 12/16/04) Current Rating Original CE¹ Current CE¹ A-1a 220,000, % 15-Mar-07 AAA Disc. Repaid 6.30% 17.80% A-1b 2 657,000, ml 15-Mar-07 AAA Disc. Repaid 6.30% 17.80% A-2 740,000,000 20,080, % 15-Feb-08 AAA AAA 6.30% 17.80% A-3 558,000, ,000, % 15-Jan-09 AAA AAA 6.30% 17.80% A-4 240,455, ,455, % 15-Jul-09 AAA AAA 6.30% 17.80% B 97,397,000 97,397, % 16-Nov-09 A AAA 3.78% 11.14% C 32,465,000 32,465, % 15-Jan-10 BBB (high) AA 2.52% 7.80% D 25,972,000 25,972, % 15-May-12 BB (high) BBB 1.51% 5.14% 2,571,289, ,369,702 ¹ Excludes excess spread. 2 Swap counterparty: Credit Suisse First Boston rated AA/R-1 (high) by DBRS as of May 31,

5 Auto Sector Surveillance and DBRS s Auto Performance Analytics Report Additionally, the original and current balances of the reserve and overcollateralization accounts are provided along with excess spread levels as shown below: Credit Enhancement Capital Auto Receivables Asset Trust Original Amount Original (%) 1 Current Amount Current (%) 1 Reserve Account $12,986, % $12,896, % Overcollateralization $25,974, % $38,547, % Annualized Excess Spread $5,228, % 2 $7,797, % 1 As a percentage of outstanding notes. 2 Estimated at closing. Loss Analysis The Auto PAR provides original DBRS loss assumptions for transactions as well as standard loss forecasts. DBRS ORIGINAL BASE CASE LOSS AND LOSS TIMING The Auto PARs provide a chart with a DBRS base case loss assumption and the related loss timing curve considered in the original rating analysis. In the Loss Forecast (see chart below) cumulative net losses realized to date (Actual CNL) are charted relative to DBRS s base case net loss assumption (DBRS Base Case). This chart offers a visual perspective on current loss performance relative to the original base case assumptions, providing immediate insight on the relative performance of the collateral. Loss Forecast Capital Auto Receivables Asset Trust % 2.50% CNL 1.50% 1.00% 0.50% DBRS Base Case Straight Line Projection Orig Loss Curve Actual CNL ESTIMATE OF EXPECTED REMAINING LOSS Three different loss projection methods are used and applied to every transaction to provide consistent benchmarks for extrapolating remaining expected loss (REL) on the collateral. These methods include the (1) straight line, (2) original-loss-curve and (3) pool-factor loss methods. Each of these methods systematically calculates remaining loss estimates by using current cumulative net losses (CumL) as a starting point, and are summarized on the following page: 5

6 Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) Straight-Line Method. An average is determined by taking the ratio of a transaction s CumL incurred to date divided by the number of periods in the transaction that have already occurred. This average is then multiplied by the number of remaining periods to arrive at the REL. Original-Loss-Curve Method. Similar to the straight-line method, this method uses actual transaction CumL and DBRS s original loss timing curve to project REL. This method assumes the actual timing of defaults will mirror the original loss curve considered in the original rating analysis. For example, if the original timing curve assumes 40% of losses will occur by the end of year one, and actual losses are 2%, the REL for the transaction would be 3%. 1 Pool-Factor Method. This technique derives REL from the relationship of current CumL to the amount of amortized pool balance. For example, if current CumL is 1%, and 25% of the pool has amortized, the REL would be 3%. 2 This method assumes that future losses occur based on the current ratio of CumL to amortized collateral amounts. This method tends to be extremely onerous in the first few periods of a transaction and, over time becomes more realistic. DBRS Expected Loss Analysis Capital Auto Receivables Asset Trust Base Case Pool Factor Method Straight Line Original Loss Curve Current CNL 1.02% 1.02% 1.02% 1.02% Current CNL ($) $28,257,093 $28,257,093 $28,257,093 $28,257,093 Remaining CNL 1.58% 0.62% 0.67% 0.29% Remaining CNL ($) $43,558,996 $17,210,100 $18,513,268 $8,058,840 DBRS Base Case CNL 2.60% 1.65% 1.69% 1.31% DBRS Base Case CNL ($) $71,816,089 $45,467,192 $46,770,360 $36,315,932 DBRS is careful to consider the implications and limitations of each of these loss estimates within the context of current sector fundamentals. DBRS is not limited to these loss projection methods and is careful to recognize situations where the above-mentioned loss projection calculations are not appropriate. For example, because the three published loss projection methods use actual cumulative net losses as inputs to the REL calculation, each method inherently assumes that past transaction performance is indicative of future performance. This may be an inappropriate assumption if a sector has recently undergone a period of robust performance, as these projections may understate REL. Or, if prepays are faster than expected and losses are simultaneously back-loaded, the understatement of REL will be exacerbated by the pool-factor method. TRANCHE LOSS COVERAGE ANALYSIS Using each of the three methods to estimate remaining expected losses, DBRS then calculates a loss coverage ratio for each tranche (see table below) based on the current hard credit enhancement available to each class. If measures of loss coverage grow for any given bond, DBRS may consider an upgrade of the bond. Likewise, as measures of loss coverage decrease, DBRS may consider the rating for a potential downgrade. Loss coverage ratios provide simple measures, and represent one of many potential factors that may indicate a change in credit quality that may affect a transaction s rating. Furthermore, the loss coverage multiples published on the DBRS Auto PARs give no credit to excess spread. However, for a rating review, the DBRS analysis will consider excess spread in its cash flow stress scenarios. 6 1 If the loss curve at the end of year one assumes 40% of total CumL has occurred and current CumL is 2%, REL is derived as follows: (2%/40%) = 5%; REL = 5%-2% = 3%. 2 If the original collateral was $1,000,000 and current collateral is $750,000, the pool factor is 750,000/1,000,000 = Assuming CumL is 1%, the pool-factor method projects total CumL to be 4% (1%/(1-0.75) = 4%); REL = 4%-1% = 3%.

7 Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) Class Summary Capital Auto Receivables Asset Trust Loss Coverage Multiples Original Balance Current Balance Coupon Final Maturity Original Rating (as of 12/16/04) Current Rating (as of 4/26/07) PFM Loss Coverage Straight Line Coverage Original Loss Curve A-1a 220,000, % 15-Mar-07 AAA Disc. Repaid A-1b 657,000, ml 15-Mar-07 AAA Disc. Repaid A-2 740,000,000 20,080, % 15-Feb-08 AAA AAA A-3 558,000, ,000, % 15-Jan-09 AAA AAA A-4 240,455, ,455, % 15-Jul-09 AAA AAA B 97,397,000 97,397, % 16-Nov-09 A AAA C 32,465,000 32,465, % 15-Jan-10 BBB (high) AA D 25,972,000 25,972, % 15-May-12 BB (high) BBB ,571,289, ,369,702 Historical Performance of Collateral In addition to loss coverage, the DBRS Auto PARs provide historical perspective on collateral performance. Historical delinquencies, interest coverage, principal pass-through and excess spread performance provide added insight on the potential future performance of the transaction structure. DELINQUENCY HISTORY Current delinquencies provide the most immediate perspective on the pipeline of future losses. The DBRS Delinquency History chart presents the dollar amount of delinquencies for a given category of delinquent borrowers as a percentage of the ending pool balance. The percentages are not seasonally adjusted. If a delinquency trigger is included in a transaction structure, the trigger will also be displayed. Delinquency History Capital Auto Receivables Asset Trust * 4.50% 4.00% 3.50% 3.00% 2.50% 1.50% 1.00% 0.50% Dec-04 Revolving Period Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov Day % Day % 90+ Day % * The monthly servicing report does not state delinquencies on a dollar basis during the revolving period. Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 7

8 Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) INTEREST COVERAGE Interest coverage provides a relative measure of liquidity. DBRS calculates, to the extent the information is available, the ratio of total interest collections (and any swap-related income) on the underlying collateral pool to the related fees and cost of funds associated with the transaction structure. DBRS includes a second measure of interest coverage that additionally considers net losses for the period. As long as these measures are greater than one, the collateral is producing enough cash on a periodic basis to cover related expenses (and losses). If interest coverage 3 is less than one, this indicates a shortfall of interest income to cover the related expenses (and losses) for the period. In this situation, depending on the transaction structure, the additional cash to cover expenses and losses may come from overcollateralization or the reserve account, if available. Interest Coverage, Principal Pass-Through and Excess Spread Capital Auto Receivables Asset Trust Interest Coverage/ Principal Pass Through Revolving Period 2.50% 1.50% 1.00% 0.50% Annualized XS - Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr % Interest Coverage¹ Principal Pass Through² Interest Coverage Annualized XS³ ¹ Interest coverage = (total collections - principal collections)/(fees + net swap receipts + note interest) Interest coverage = (total collections - principal collections - losses)/(fees + net swap receipts + note interest) ² Principal pass-through = period note amortization/period collateral amortization ³ Annualized XS = {[total Interest collections - (fees + net swap receipts + note interest) - losses]/ending note balance} * 12 PRINCIPAL PASS-THROUGH To maintain continuous perspective on the parity between the collateral and the notes, DBRS tracks each period s principal paydown on the aggregate notes outstanding relative to the collateral amortization. This ratio is referred to as the principal pass-through ratio. The ratio may be greater than one if note principal payments are made from a source other than collateral principal collections (i.e., excess spread or amounts from the overcollateralization account). The ratio may be less than one if (1) target overcollateralization amounts have exceeded targeted levels and are released to a residual holder or (2) collateral principal collections have been used to cover a shortfall in fees or interest on the notes in the current period. Generally, DBRS expects this ratio to be one to one and will initiate further review if it deviates from this. EXCESS SPREAD Reflecting the relative excess liquidity within the transaction, the excess spread is frequently viewed as additional credit enhancement available to cover losses. DBRS calculates a current period excess spread 4 by annualizing the dollar amount of the excess of interest collections over fees, losses, and cost of funds (similar to interest coverage) as a percentage of the ending note balance. Depending on the transaction structure, the excess spread may be either released from the transaction, or potentially kept within the deal to cover future losses. 3 In the footnotes to each PAR, DBRS describes how the interest coverage ratio is calculated as it may vary across transactions based on available reported information. 4 For each PAR, DBRS discloses its calculation of transaction excess spread; the calculation will vary depending on the reported information. 8

9 A Guide to DBRS s Auto Performance Analytics Reports Appendix: Capital Auto Receivables Asset Trust Performance Analytics Report DBRS Retail Auto Performance Analytics Report Capital Auto Receivables Asset Trust Distribution Date May-07 Originator: General Motors Acceptance Corp. Collection Period April-07 Seller: Capital Auto Receivables Inc. (SPV) Closing Date December-04 Servicer: General Motors Acceptance Corp. Period 29 Indenture Trustee: JP Morgan Chase Bank Payment Frequency Monthly Class Summary Loss Coverage Multiples Original Rating Current Rating ( PFM Loss Straight Line Original Loss Original Balance Current Balance Coupon Final Maturity (as of 12/16/04) as of 4/26/07) Original CE¹ Current CE¹ Current CE $¹ Coverage Coverage Curve A-1a $ 220,000,000 $ % 15-Mar-07 AAA Disc. Repaid 6.30% 17.80% 207,367,580 # A-1b 2 $ 657,000,000 $ - 1 ml 15-Mar-07 AAA Disc. Repaid 6.30% 17.80% 207,367,580 # A-2 $ 740,000,000 $ 20,080, % 15-Feb-08 AAA AAA 6.30% 17.80% 207,367,580 # A-3 $ 558,000,000 $ 558,000, % 15-Jan-09 AAA AAA 6.30% 17.80% 207,367,580 # A-4 $ 240,455,000 $ 240,455, % 15-Jul-09 AAA AAA 6.30% 17.80% 207,367,580 # B $ 97,397,000 $ 97,397, % 16-Nov-09 A AAA 3.78% 11.14% 109,970,580 # C $ 32,465,000 $ 32,465, % 15-Jan-10 BBB (high) AA 2.52% 7.80% 77,505,580 # D $ 25,972,000 $ 25,972, % 15-May-12 BB (high) BBB 1.51% 5.14% 51,533,580 # $ 2,571,289,000 $ 974,369,702 ¹ Excludes excess spread 2 Swap Counterparty: Credit Suisse First Boston rated 'AA'/'R-1 (high) by DBRS as of 5/31/2007 Collateral Summary Other Components of CE Original Current Original $ Original % 1 Current $ Current % 1 Pool Balance $2,762,157,256 1,045,523,138 Reserve Account $ 12,986, % $ 12,986, % Discounted Pool $2,597,763,866 1,012,916,961 Overcollateralization $ 25,974, % $ 38,547, % Pool Factor Excess Spread $5,228, % 2 $7,797, % WA Coupon 3.80% 3.80% WA Orig. Term WA Rem. Term Seasoning (mo) As a percentage of outstanding notes. 2 Estimated at closing. Revolving Period: The trust did not pay principal during the revolving period, which terminated on October 31, 2005 DBRS Expected Loss Analysis Base Case Pool Factor Method Straight Line Orig Loss Curve Current CNL 1.02% 1.02% 1.02% 1.02% Current CNL ($) $ 28,257,093 $ 28,257,093 $ 28,257,093 $ 28,257,093 Remaining CNL 1.58% 0.62% 0.67% 0.29% Remaining CNL $ $ 43,558,996 $ 17,210,100 $ 18,513,268 $ 8,058,840 DBRS Base Case CNL 2.60% 1.65% 1.69% 1.31% DBRS Base Case CNL $ $ 71,816,089 $ 45,467,192 $ 46,770,360 $ 36,315,932 Specified Reserve Account Balance: (i) the lesser of (A) 0.50% of the Initial Aggregate Receivables Principal Balance; and (B) the outstanding principal balance of the Notes OC Initial and Target: 1% of initial aggregate receivables with a target at 1.5% of initial aggregate receivables. PARsurvelliance@drbs.com 9

10 Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) DBRS Retail Auto Performance Analytics Report Capital Auto Receivables Asset Trust % Loss Forecast 2.50% CNL 1.50% 1.00% 0.50% DBRS Base Case Straight Line Projection Orig Loss Curve Actual CNL Delinquency History* 4.50% 4.00% 3.50% 3.00% 2.50% 1.50% 1.00% 0.50% 12 month Revolving Period Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov Day % Day % 90+ Day % Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 * The monthly servicing report does not state delinquencies on a dollar basis during the revolving period. CARAT Page 2 of 3 10

11 Auto Sector Surveillance and DBRS Auto PAR (Performance Analytics Report) DBRS Retail Auto Performance Analytics Report Capital Auto Receivables Asset Trust Interest Coverage, Principal Pass Through and Excess Spread % Interest Coverage / Principal Pass Through % 1.00% 0.50% -0.50% Annualized XS Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Interest Coverage¹ Principal Pass Through³ Interest Coverage² Annualized XS 4 Oct-06 Dec-06 Feb-07 Apr-07 ¹ Interest Coverage = (total collections - principal collections)/(fees + net swap receipts + note interest). ² Interest Coverage = (total collections - principal collections-losses)/(fees + net swap receipts + note interest). ³ Principal Pass Through = period note amortization/period collateral amortization. 4 Annualized XS = {[total Interest collections - (fees + net swap receipts + note interest) - losses]/ ending note balance} *12 Credit Enhancement Summary % 16.00% 14.00% % 6.00% 4.00% Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 Class A - AAA Class B - A Class C - BBB (high) Class D - BB (high) Copyright 2007, DBRS Limited, DBRS, Inc. and DBRS (Europe) Limited (collectively, DBRS). All rights reserved. The information upon which DBRS ratings and reports are based is obtained by DBRS from sources believed by DBRS to be accurate and reliable. DBRS does not perform any audit and does not independently verify the accuracy of the information provided to it. DBRS ratings, reports and any other information provided by DBRS are provided as is and without warranty of any kind. DBRS hereby disclaims any representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability, fitness for any particular purpose or non-infringement of any of such information. In no event shall DBRS or its directors, officers, employees, independent contractors, agents and representatives (collectively, DBRS Representatives) be liable (1) for any inaccuracy, delay, interruption in service, error or omission or for any resulting damages or (2) for any direct, indirect, incidental, special, compensatory or consequential damages with respect to any error (negligent or otherwise) or other circumstance or contingency within or outside the control of DBRS or any DBRS Representatives in connection with or related to obtaining, collecting, compiling, analyzing, interpreting, communicating, publishing or delivering any information. Ratings and other opinions issued by DBRS are, and must be construed solely as, statements of opinion and not statements of fact as to credit worthiness or recommendations to purchase, sell or hold any securities. DBRS receives compensation, ranging from US$1,000 to US$750,000 (or the applicable currency equivalent) from issuers, insurers, guarantors and/or underwriters of debt securities for assigning ratings. This publication may not be reproduced, retransmitted or distributed in any form without the prior written consent of DBRS. CARAT Page 3 of 3 11

12 Copyright 2007, DBRS Limited, DBRS, Inc. and DBRS (Europe) Limited (collectively, DBRS). All rights reserved. The information upon which DBRS ratings and reports are based is obtained by DBRS from sources believed by DBRS to be accurate and reliable. DBRS does not perform any audit and does not independently verify the accuracy of the information provided to it. DBRS ratings, reports and any other information provided by DBRS are provided as is and without warranty of any kind. DBRS hereby disclaims any representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability, fitness for any particular purpose or non-infringement of any of such information. In no event shall DBRS or its directors, officers, employees, independent contractors, agents and representatives (collectively, DBRS Representatives) be liable (1) for any inaccuracy, delay, interruption in service, error or omission or for any resulting damages or (2) for any direct, indirect, incidental, special, compensatory or consequential damages with respect to any error (negligent or otherwise) or other circumstance or contingency within or outside the control of DBRS or any DBRS Representatives in connection with or related to obtaining, collecting, compiling, analyzing, interpreting, communicating, publishing or delivering any information. Ratings and other opinions issued by DBRS are, and must be construed solely as, statements of opinion and not statements of fact as to credit worthiness or recommendations to purchase, sell or hold any securities. DBRS receives compensation, ranging from US$1,000 to US$750,000 (or the applicable currency equivalent) from issuers, insurers, guarantors and/or underwriters of debt securities for assigning ratings. This publication may not be reproduced, retransmitted or distributed in any form without the prior written consent of DBRS.

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