Rating Affirmed On Class C From California Republic Auto Receivables Trust 2017-1

OVERVIEW
  • We reviewed California Republic Auto Receivables Trust 2017-1, which is backed by auto loan receivables.
  • On June 13, 2018, we placed the rating on the class C notes on CreditWatch negative and we maintained the negative CreditWatch placement on Sept. 21, 2018.
  • Today, we affirmed our rating on the class C notes from series 2017-1 and removed it from CreditWatch negative.
NEW YORK (S&P Global Ratings) Dec. 19, 2018--S&P Global Ratings today affirmed 
its 'BBB (sf)' rating on the class C notes from California Republic Auto 
Receivables Trust 2017-1. We also removed the rating from CreditWatch, where 
we placed it with negative implications on June 13, 2018. We maintained the 
negative CreditWatch placement on Sept. 21, 2018.

Today's affirmation reflects collateral performance to date and our 
expectations regarding future collateral performance, as well as the 
transaction's structure and credit enhancement. Additionally, we incorporated 
secondary credit factors, including credit stability, payment priorities under 
various scenarios, and sector- and issuer-specific analyses. 

Series 2017-1 is performing worse than our initial expectations. As a result, 
in June 2018 we revised upward our expected cumulative net loss range to 
5.00%-5.40%, up from 3.00% to 3.20%.

While the transaction remains in its peak loss period, we expect, consistent 
with prior transactions, the pace of losses to stabilize and possibly slow 
down after the peak loss period.
In addition, we have observed stable delinquencies in line with prior 
transactions (see table 1). 


Table 1
Collateral Performance (%)
As of the December 2018 distribution date
                    Pool     Current    60+-day        90+-day
Series     Mo.    factor         CNL    delinq.        delinq.
2017-1      22     48.51        2.28       1.31           0.43
Mo.--Month. CNL--Cumulative net loss. Delinq.--Delinquencies.

Credit enhancement for Class C is in the form of a reserve account, 
overcollateralization (O/C), and excess spread. Both the reserve account and 
O/C are nonamortizing. 

The hard credit support has grown as a percentage of the current pool balance 
(see table 2) and we expect further deleveraging as the pool amortizes.

The reserve account is at its specified level of 0.25% of the initial pool 
balance. The O/C amount, after building to its target in the initial months 
after closing, has consistently been at its target of 2.2% of initial 
receivables.

Table 2
Hard Credit Support 
As of the December 2018 distribution date
                        Total hard           Current total hard
                 credit support at               credit support
Series   Class     issuance (%)(i)            (% of current)(i)
2017-1   C                    0.55                         5.05
(i)Calculated as a percentage of the total pool balance, consisting of a 
reserve account and overcollateralization.

We incorporated a cash flow analysis to assess the loss coverage level, giving 
credit to excess spread. Our various cash-flow scenarios included 
forward-looking assumptions on recoveries, timing of losses, and voluntary 
absolute prepayment speeds that we believe are appropriate given the 
transaction's performance to date.

We believe that the credit enhancement is adequate to support the rating 
factoring in our current loss expectations. As a result, we affirmed the 'BBB 
(sf)' ratings on the class C notes and removed the rating from CreditWatch 
negative.

We will continue to monitor the performance of the transaction to ensure that 
the credit enhancement remains sufficient, in our view, to cover our 
cumulative net loss expectations under our stress scenarios for  the rated 
classes. 
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