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TEXT-Fitch rates NCAR LP Promissory Note 2012-01
September 17, 2012 / 4:37 PM / 5 years ago

TEXT-Fitch rates NCAR LP Promissory Note 2012-01

Sept 17 - Fitch Ratings assigns the following ratings to Nissan Canada Auto
Receivables (NCAR) Limited Partnership Promissory Note (NCAR LP Promissory Note

--$398,643,363 Promissory Note: 'AAsf'; Outlook Stable.

Transaction Summary

The note will be backed by a pool of automobile, SUV, and light-truck vehicle 
leases, all of which are new vehicles manufactured by Nissan Motor Company Ltd. 
 (Nissan) and originated through Nissan Canada Finance (NCF) a division
of Nissan Canada Inc. (NCI). This transaction will represent NCI's second auto 
lease-related ABS issuance rated by Fitch. The note will be serviced by NCI, an 
indirect and wholly owned subsidiary of Nissan. Proceeds from the issuance are 
expected to be used for general corporate purposes. 

Key Rating Drivers

Stable Collateral Quality: The pool comprises strong credit quality leases with 
a strong WA FICO score, all new vehicles, while the majority of the pool 
contains cars and crossovers, consistent with NIF-T 2010-1.

Consistent CE Structure: The credit enhancement (CE) for the note includes 
overcollateralization (OC) and a reserve account. The transaction additionally 
benefits from sizable annual and lifetime excess spread. Overall, credit 
enhancement is sufficient to support Fitch's 'AAsf' stressed credit loss and 
stressed residual value loss expectations.  

Strong Credit and Residual Losses: Credit losses on NCI's portfolio and 
securitizations have continued to display strong performance, even during the 
financial crisis of 2008/2009. Strong residual realizations in recent years have
been supported by the improvement in the wholesale used vehicle market. 

Stable Origination, Underwriting and Serving: NCI demonstrates capable abilities
as originator, underwriter, and servicer, as evidenced by historical delinquency
and loss performance of the managed portfolio. 

Concentrated/Long-Dated Residual Maturities: While residual realizations have 
improved in recent years, Fitch remains cautious as to the potential impact of 
general economic weakness and rising fuel prices on demand for used vehicles. 
The pool does contain a significant concentration in leases which mature between
2015 and 2017.

State of the Canadian Wholesale Market: While the improvement in the Canadian 
wholesale vehicle market has not yet been as strong as that of the U.S., it has 
rebounded considerably from the lows of 2008/2009, and is expected to remain 
robust through 2012 and into 2013.

Unstable Economic Conditions: Fitch remains concerned regarding potential 
macroeconomic deterioration, including uncertainties in the Canadian housing 
market, which could lead to increased credit and residual loss levels. Potential
volatility in gas prices in the near term may harm the residual values of 
certain vehicles such as less fuel efficient models, namely sport utility 
vehicles (SUVs).

Integrity of the Legal Structure: The legal structure of the transaction should 
provide that a bankruptcy of NCI would not impair the timeliness of payments on 
the securities.    

Criteria Application

Fitch's base-case and stressed-case credit and residual value loss derivation, 
modeling assumptions, and loss multiples for the transaction's ratings are 
consistent with the published auto lease rating criteria published on Fitch's 
Web site. Fitch's criteria report titled 'Criteria for Rating U.S. Auto Lease 
ABS,' dated May 14, 2012, available on Fitch's Web site at,
was used to analyze this transaction. Additionally, applicable criteria reports 
include 'Global Structured Finance Rating Criteria,' dated June 6, 2012, and . 
'Counterparty Criteria for Structured Finance Transactions,'.  dated May 30, 
2012, also available on Fitch's Web site. Multiples were applied consistent with
the prime ranges in the auto lease criteria. 

Asset Analysis

The note is backed by a pool of prime automobile leases of new Nissan and 
Infiniti vehicles originated by NCF. The property of the issuer includes: the 
receivables and collections thereon; security interest in the vehicles; rights 
to proceeds from claims on physical damage, credit life, and disability 
insurance policies covering the leased vehicles/lessees; rights in the reserve 
account; rights under the documents for the repurchase of ineligible 
receivables; and other related items. 

Borrower Attributes

Lessee Credit Quality 

The transaction pool is composed of strong, prime-quality borrowers, with a 
strong WA FICO score, slightly higher than for NIF-T 2010-1. 

Geographic Concentration 

The transaction pool has adequate geographic dispersion. The geographic 
distribution is consistent with that of NIF-T 2010-1. The largest concentration 
of receivables in the transaction is in Ontario, followed by Quebec, and 

Collateral Attributes

Manufacturer/Brand/Model Diversification 

All of the leased vehicles in the transaction are either Nissan or Infiniti 
brand vehicles, as was the case in the prior NIF-T transaction. Model 
concentrations improved considerably compared to former transactions. 

Vehicle Segment

Cars and crossovers make up the vast majority of the leased vehicles in the 
transaction while SUVs, trucks, vans and minivans comprise the remainder of the 

New/Used Composition

Consistent with prior NIF-T transaction, all of the leases are for new vehicles.

Lease Attributes

Residual Value Composition 

The residual value composition of the NCAR 2012 pool is the lowest of recent 
transactions, as measured by undiscounted base residual as a percentage of 
securitization value. 

Original Lease Term 

Historically, NCF's lease portfolio has had a high proportion of three- to 
four-year leases. Similarly, the majority of the leases included in the 
transaction have original terms greater than 36 months. 

Residual Value Maturity Distribution 

The residual maturity schedule is highly concentrated on the back-end with a 
substantial percentage of the portfolio leases maturing between 2015 and 2017. 


Seasoning on the pool is lower than NIF-T 2010-1. 

Credit Loss Analysis

Fitch expects the net credit losses for the transaction to be approximately 
0.85% (as a percentage of securitization value). Fitch's credit loss proxy was 
derived utilizing the static pool credit net loss data and then weighted 
according to the composition of the pool. Fitch looked to cover the expected net
credit losses for the 'AAsf' rating scenario by 4.0x. As a result, with an 
assumed net loss proxy of 0.85%, the notes would need to be able to cover 3.40% 
in net credit losses, in addition to assumed residual value losses, to be 
eligible for an 'AAsf' rating.

'BBsf' Residual Value Loss Assumption

To determine residual losses for the portfolio, Fitch analyzed residual 
realization data for all models in the pool broken out by term, compared with 
each model's initial residual value estimates provided by Canadian Black Book. 
This analysis ignored all gains experienced and focused on the period of 
February 2008-January 2009, during which the peak historical 12-month average 
residual loss levels were observed.Counterparty Criteria for Structured Finance TransactionsStructured Finance Tranche Thickness MetricsRating Criteria for U.S. Auto Loan ABSGlobal Structured Finance Rating Criteria

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