DBRS Morningstar Finalizes Provisional Ratings on CPS Auto Receivables Trust 2020-A

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes issued by CPS Auto Receivables Trust 2020-A (CPS 2020-A or the Issuer):

-- $130,000,000 Class A Notes rated AAA (sf)
-- $34,060,000 Class B Notes rated AA (sf)
-- $37,180,000 Class C Notes rated A (sf)
-- $26,000,000 Class D Notes rated BBB (sf)
-- $26,260,000 Class E Notes rated BB (sf)
-- $6,500,000 Class F Notes rated B (sf)

The ratings are based on DBRS Morningstar’s review of the following analytical considerations:
-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, subordination, amounts held in the reserve fund, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar-projected expected cumulative net loss assumption under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the rating addresses the payment of timely interest on a monthly basis and the payment of principal by the legal final maturity date.
-- The capabilities of Consumer Portfolio Services, Inc. (CPS) with regard to originations, underwriting, and servicing.
-- DBRS Morningstar performed an operational review of CPS and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts. This transaction also has an acceptable backup servicer.
-- The CPS senior management team has considerable experience and a successful track record within the auto finance industry, managing the company through multiple economic cycles.
-- The quality and consistency of provided historical static pool data for CPS originations and performance of the CPS auto loan portfolio.
-- The May 29, 2014, settlement of the Federal Trade Commission (FTC) inquiry relating to allegedly unfair trade practices. CPS paid imposed penalties and restitution payments to consumers.
-- CPS has made considerable improvements to the collections process, including management changes, upgraded systems and software, as well as implementation of new policies and procedures focused on maintaining compliance and will be subject to the FTC’s ongoing monitoring of certain processes.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with CPS, that the trust has a valid first-priority security interest in the assets, and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

The CPS 2020-A transaction represents the 36th securitization completed by CPS since 2010 and offers both senior and subordinate rated securities. The receivables securitized in CPS 2020-A will be subprime automobile loan contracts secured primarily by used automobiles, light-duty trucks, vans, and minivans.

The rating on the Class A Notes reflects 51.00% of initial hard credit enhancement provided by the subordinated notes in the pool (50.00%) and the Reserve Account (1.00%). The ratings on the Class B, Class C, Class D, Class E, and Class F Notes reflect 37.90%, 23.60%, 13.60%, 3.50%, and 1.00% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Retail Auto Loan Securitizations, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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