Twenty-One Rating Actions Taken On Six Toyota Auto Receivables Owner Trust Transactions

  • We reviewed six Toyota Auto Receivables Owner Trust transactions (series 2016-A, 2016-D, 2017-A, 2017-B, 2018-B, and 2018-C) that are backed by pools of prime retail auto loans originated and serviced by Toyota Motor Credit Corp.
  • We raised our rating on one class and affirmed our ratings on 20 classes from the transactions.
  • The rating actions reflect our views regarding the transactions' collateral performance, structure, and credit enhancement.
New York (S&P Global Ratings) Aug. 23, 2019--S&P Global Ratings today raised 
its rating on one class and affirmed its ratings on 20 classes from Toyota 
Auto Receivables Owner Trust series 2016-A, 2016-D, 2017—A, 2017-B, 2018-B, 
and 2018-C. The transactions are backed by auto loans originated and serviced 
by Toyota Motor Credit Corp. (see list).

The rating actions reflect our view of each transaction's current and future 
collateral performance, structure, and credit enhancement. In addition, our 
analysis incorporates secondary credit factors, such as credit stability, 
payment priorities under various scenarios, and sector- and issuer-specific 
analyses. 

We decreased our lifetime loss range expectations on series 2016-A, 2016-D, 
2017-A, and 2017-B from our former revised loss range expectations based on 
the transactions' lower-than-expected cumulative net losses (CNLs) and 
delinquency rates (see tables 1 and 2). Series 2018-B and 2018-C are currently 
performing in line with our initial expectations.

We believe each transaction's total credit support, as a percentage of the 
current pool balance and compared with our current remaining loss expectation, 
is adequate for each related raised or affirmed rating.

Table 1
Collateral Performance (%)
As of the August 2019 distribution date 
 
                          Pool   Current    60+ day
Series           Mo.    factor       CNL    delinq.
2016-A            41      8.25      0.38       0.44
2016-D            34     15.52      0.43       0.42
2017-A            29     23.85      0.38       0.32
2017-B            27     28.12      0.41       0.35
2018-B            15     55.10      0.21       0.25
2018-C            12     63.03      0.20       0.21
 
Mo.--Month. CNL--cumulative net loss. Delinq.—Delinquencies. 
 
 
Table 2
CNL Expectations (%)
As of the August 2019 distribution date  
 
                 Original        Former        Current
                 lifetime       revised       lifetime
Series           CNL exp.    CNL exp.(i)      CNL exp.
2016-A          0.50-0.60      0.40-0.50    up to 0.45
2016-D          0.55-0.65      0.55-0.65     0.50-0.60
2017-A          0.55-0.65      0.55-0.65     0.50-0.60
2017-B          0.55-0.65      0.55-0.65     0.50-0.60
2018-B          0.55-0.65            N/A     0.55-0.65
2018-C          0.55-0.65            N/A     0.55-0.65

(i)Former revised CNL exp. as of August 2018 for series 2016-A, 2017-A, and 
2017-B. As of February 2018 for series 2016-D. CNL exp.--Cumulative net loss 
expectations.
 
Each transaction has a sequential principal payment structure with credit 
enhancement in the form of overcollateralization, a nonamortizing reserve 
account, yield supplement overcollateralization (YSOC), and subordination 
where applicable. Since closing, the class A credit support for the six 
transactions increased as a percentage of the amortizing pool balance (see 
table 3). YSOC is calculated on a monthly basis, which allows for potential 
releases. As such, to stress our coverage multiples, we applied a haircut to 
the YSOC amount in our analysis. As of the August 2019 distribution date, the 
credit enhancement for each transaction was at the specified enhancement 
target.

For the series 2018-B and 2018-C class B notes, the current total hard credit 
support declined slightly from issuance. This resulted from the lower YSOC (as 
a percentage of the current pool balance) being slightly greater than the 
increase in the combined reserve account and overcollateralization. The YSOC 
is calculated each month as the pool amortizes based on the difference between 
the aggregate receivables balance outstanding and the present value of the 
receivables balance, discounted at the greater of YSOC discount rate or the 
receivables' actual annual percentage rate (APR). The YSOC amount is sized so 
that the yield on the contracts with APRs below the YSOC discount rate is 
raised to the required rate. Despite the slight decrease in hard credit 
support for the series 2018-B and 2018-C class B notes, the available credit 
enhancement supports the affirmed rating, in our view.

Table 3
Hard Credit Support (%)
As of the August 2019 distribution date 

                        Total hard    Current total hard
                    credit support        credit support
Series      Class   at issuance(i)     (% of current)(i)
2016-A      A-4               8.72                 42.74
2016-A      B                 6.38                 14.30
2016-D      A-3               8.45                 24.17
2016-D      A-4               8.45                 24.17
2016-D      B                 6.10                  9.01
2017-A      A-3               9.42                 17.62
2017-A      A-4               9.42                 17.62
2017-A      B                 7.09                  7.85
2017-B      A-3               9.67                 15.98
2017-B      A-4               9.67                 15.98
2017-B      B                 7.35                  7.73
2018-B      A-2a             11.98                 13.28
2018-B      A-2b             11.98                 13.28
2018-B      A-3              11.98                 13.28
2018-B      A-4              11.98                 13.28
2018-B      B                 9.72                  9.18
2018-C      A-2a             12.07                 13.00
2018-C      A-2b             12.07                 13.00
2018-C      A-3              12.07                 13.00
2018-C      A-4              12.07                 13.00
2018-C      B                 9.81                  9.41

(i)Calculated as a percentage of the total gross receivables pool balance, 
which consists of a reserve account, overcollateralization, yield supplement 
overcollateralization (100%), and, if applicable, subordination.

We compared the current hard credit enhancement with the expected remaining 
CNL for all classes of notes for which the credit enhancement alone, without 
giving credit to the excess spread, was sufficient to raise or affirm the 
ratings.

We will continue to monitor the performance of these transactions to ensure 
the credit enhancement remains sufficient, in our view, to cover our CNL 
expectations under our stress scenarios for each of the rated classes.
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