GM Financial Automobile Leasing Trust

Transcription

1 Presale: GM Financial Automobile Leasing Trust This presale report is based on information as of Feb. 8, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Preliminary rating(i) Type Interest rate(ii) Preliminary amount (mil. $) Expected legal final maturity date A-1 A-1+ (sf) Senior Fixed Feb. 20, 2019 A-2-A/A-2-B AAA (sf) Senior Fixed/floating(iii) April 20, 2020 A-3 AAA (sf) Senior Fixed Jan. 20, 2021 A-4 AAA (sf) Senior Fixed Dec. 20, 2021 B AA+ (sf) Subordinate Fixed Dec. 20, 2021 C A+ (sf) Subordinate Fixed Dec. 20, 2021 D A (sf) Subordinate Fixed Oct. 20, 2022 (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the actual coupons of these tranches will be determined on the pricing date. (iii)the class A-2 notes will be split into a fixed-rate class A-2-A and a floating-rate class A-2-B. The sizes of classes A-2-A and A-2-B will be determined at pricing. The class A-2-B coupon will be expressed as a spread tied to one-month LIBOR. The principal amount of the class A-2-B notes is not expected to exceed $200 million. Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com See complete contact list on last page(s) FEBRUARY 8,

2 Profile Expected closing date Feb. 22, Collateral Sponsor, servicer, and administrator Auto lease receivables. AmeriCredit Financial Services Inc., doing business as GM Financial, a wholly owned subsidiary of General Motors Financial Co. Inc. (BBB/Stable/--). Issuer GM Financial Automobile Leasing Trust Titling trust Depositor Indenture trustee, administrative agent, and collateral agent Owner trustee Lead underwriter ACAR Leasing Ltd. GMF Leasing LLC. Wells Fargo Bank N.A. (AA-/Negative/A-1+). Wilmington Trust Co. (A/Negative/A-1). Deutsche Bank Securities Inc. Credit Enhancement Summary(i) (ii) Rating Class A A-1+ (sf)/aaa (sf) NR A-1+ (sf)/aaa (sf) Class B AA+ (sf) NR AA+ (sf) Class C A+ (sf) NR A+ (sf) Class D A (sf) NR A- (sf) Subordination (%) Class A Class B Class C Class D N/A N/A N/A Overcollateralization (%) Initial Target(iii) Reserve account (%) Initial Target Total initial hard credit enhancement (%) Class A Class B Class C Class D Total target hard credit enhancement (%)(iv) Class A Class B Class C Class D FEBRUARY 8,

3 Credit Enhancement Summary(i) (cont.) (ii) Estimated excess spread per year (%)(v) Discount rate (%) Initial aggregate securitization value ($) 1,362,401,047 1,090,137,186 1,362,471,925 Total securities issued ($) 1,250,000,000 1,000,200,000 1,250,000,000 (i)all percentages are based on the initial aggregate securitization value. (ii)not rated by S&P Global Ratings. (iii)the target overcollateralization of 10.75% of the initial receivables will decrease to 9.75% after the class A-2 notes are fully paid off. (iv)the total target credit enhancement will step down by 100 basis points in each rating category after the class A-2 notes are fully paid off. (v)reflects estimated annual excess spread at the preliminary ratings and does not reflect final pricing. --GM Financial Automobile Leasing Trust. N/A--Not applicable. NR--Not ated. Rationale The preliminary ratings assigned to GM Financial Automobile Leasing Trust 's ( 's; the issuer's) $1.250 billion asset-backed notes series reflect: The availability of approximately 25.3%, 21.1%, 17.4%, and 14.7% credit support for the class A, B, C, and D notes, respectively, in the form of 11.15%, 6.80%, and 2.75% subordination for the class A, B, and C notes, respectively; 8.25% initial overcollateralization, growing to a target of 10.75%, which will step down to 9.75% once the class A-2-A and A-2-B notes are paid in full; the nonamortizing 0.50% reserve account; and the excess spread (all percentages are expressed as a percentage of the initial securitization value). Our expectation that under a moderate 'BBB' stress scenario, all else being equal, our preliminary ratings on the class A notes would not be lowered, the preliminary rating on the class B notes would not be lowered more than one rating category, and the preliminary ratings on the class C and D notes would not fall more than two rating categories for the transaction's life. This is in line with our ratings stability criteria, which state that 'AAA' and 'AA' ratings will remain within one rating category for the first year and 'A' ratings will remain within two and three rating categories for the first and three years, respectively, under moderate stress conditions. (see "Methodology: Credit Stability Criteria," published May 3, 2010). The credit quality of the underlying collateral, which consists of auto lease receivables that have a weighted average FICO score of 759. The diversified mix of vehicle models in the pool. The expected timing of the residuals' maturities. The historical retention values of the vehicles in the pool. Automotive Lease Guide's (ALG's) forecast of each vehicle's residual value at lease inception and of current residuals. The timely interest and full principal payments by the notes' legal final maturity dates made under cash flow scenarios that we stressed for credit and residual losses, which are consistent with the preliminary ratings assigned to the notes. The transaction's payment and legal structures. Our expected credit loss for the pool is 0.90% of the securitization value, which reflects our review of the static pool loss data for GM Financial lease originations, credit loss performance on securitizations, peer collateral comparisons, and our macroeconomic outlook. Our 'AAA', 'AA+', 'A+', and 'A' stress scenarios for credit loss are 4.50%, 4.05%, 3.00%, and 2.70%, respectively, of the securitization value. FEBRUARY 8,

4 Our 'AAA', 'AA+', 'A+', and 'A' residual stresses for the pool are approximately 18.02%, 16.10%, 12.66%, and 11.90%, respectively, of the pool's aggregate undiscounted base residual value. In deriving our residual stress, we compared ALG's residual value forecast at lease origination for a majority of the pool by vehicle type and term, vehicle make and term, and vehicle model with the quarterly mark-to-market of ALG's forecast, which the issuer provided. We also considered the pool's residual maturity profile, the vehicle concentration, the vehicle segment concentration, the consistency of ALG's residual forecasts regarding the historical retention values of General Motors Co. (GM) vehicles (Chevrolet, GMC, Cadillac, and Buick), and our economic and industry outlooks (see the S&P Global Ratings' Expected Credit And Residual Losses section for more information). Our total stressed losses (credit and residual) are approximately 22.5%, 20.2%, 15.7%, and 14.6% for the 'AAA', 'AA+', 'A+', and 'A' rated notes, respectively, as a percentage of the initial aggregate securitization value. The credit enhancement outlined above (and in the Cash Flow Modeling section) provides adequate support for our assigned preliminary ratings. Transaction Overview is GM Financial's first publicly placed auto lease term securitization this year and its 12th overall auto lease term transaction. It is also the seventh auto lease transaction from GM Financial that we have rated. The receivables backing the pool will consist of the monthly lease payments and base residual values (as defined in the Residual Value section) of a pool of lease contracts originated by GM dealers. The leased vehicles will consist primarily of new GM-brand passenger cars, SUVs, crossover utility vehicles (CUVs), and light-duty trucks. As with prior securitizations, series includes nonamortizing subordination for the senior notes, a nonamortizing reserve account amount, and an initial overcollateralization with nonamortizing target levels. The issuing trust will issue four class A notes, as well as class B, C, and D notes. The class A-2 notes will be split into two tranches. Class A-2-A will be issued as fixed-rate notes, and class A-2-B will be issued as floating-rate notes. The principal allocation between the two tranches will be determined by the pricing date. As a result, in our cash flow analysis, we applied an internal LIBOR vector (high path) to simulate a stressed floating-rate scenario. We modeled a maximum size of $200.0 million for the floating-rate class. For additional details, see "U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter," published April 30, Changes From The Series and Transactions There were no material changes in credit enhancement from and (the last transaction we rated). The changes in the collateral composition from series and , respectively, include: The percentage of leases with an original term of 36 months or less increased to 57.1% from 46.8% and 30.9%. The percentage of leases with an original term of months decreased to 42.9% from 53.2% and 69.1%. The percentage of cars decreased to 18.2% from 21.2% and 22.7%, while the percentage of CUVs increased to FEBRUARY 8,

5 51.7% from 49.0% and 45.2%. Overall, we decreased our expected cumulative net credit loss to 0.90% from 1.15% given, in our view, the strong credit performance of the transactions and the better credit characteristics of series Legal Structure GM Financial makes loans to ACAR Leasing Ltd. (the titling trust), which allows the titling trust to purchase leases and leased vehicles from GM dealers. The leased vehicles are titled in the titling trust's name. On the series transaction's closing date, the titling trust will issue an exchange note (the series exchange note) to GM Financial that is secured by the series designated pool of leases and the related leased vehicles. GM Financial will sell the exchange note to GMF Leasing LLC, the depositor, in a true sale. The depositor will then transfer and assign the exchange note to , a newly formed Delaware statutory trust and the issuing entity, in exchange for the asset-backed notes, which will represent the issuing entity's obligations (see chart 1). The issuing entity will pledge and assign the exchange note to the indenture trustee, which will hold a first-priority, perfected security interest in the exchange note for the series noteholders' benefit. GM Financial is the servicer for the leases and the related leased vehicles held by the titling trust and will continue to service them under FEBRUARY 8,

6 In rating this transaction, S&P Global Ratings will review the legal matters that it believes are relevant to its analysis, as outlined in its criteria. Pension Benefit Guaranty Corp. (PBGC) Risk GM Financial uses a collateral agent, Wells Fargo Bank N.A., to hold a security interest in all newly originated leases and leased vehicles for GM Financial's and the exchange noteholders' benefit. The security interest in the leases is perfected by filings under the Uniform Commercial Code, and the security interest in the leased vehicles is perfected by a notation on each vehicle's certificate of title under state motor vehicle registration laws. S&P Global Ratings expects to receive an opinion of counsel to the issuer, subject to customary assumptions and qualifications, to the effect that the collateral agent's security interest in the leases and leased vehicles would be before a lien in favor of PBGC and the notice of which will be filed after the series notes are issued. A PBGC lien could be imposed against the assets of any member of the GM-controlled group in the event of unpaid minimum FEBRUARY 8,

7 contributions to a defined benefit pension plan required by law or if an underfunded defined benefit pension plan terminates. Payment Structure On each payment date, the servicer is entitled to receive its fee of 1/12th of 1.0% for its performance during the previous collection period. In addition, on each payment date before the notes have been accelerated following an event of default, the indenture trustee will make distributions from available funds according to the payment priority shown in table 1. Principal on the notes will be paid sequentially. Table 1 Payment Waterfall (Before Acceleration Following An Event Of Default) Priority Payment 1 To any successor servicer, unpaid transition fees up to $200,000; to the indenture and owner trustees, fees, expenses, and indemnities up to $100,000 and $100,000, respectively, per year; and to the asset representations reviewer, up to $200,000 per year. 2 Interest on the class A notes, pari passu. 3 Principal on the class A notes, sequentially, until the class A note balance reaches parity with the aggregate securitization value as of the end of the previous collection period. 4 The remaining principal balance of any class A notes on their respective final scheduled distribution date. 5 Interest on the class B notes. 6 Principal on the class A and B notes until their combined note balance reaches parity with the aggregate securitization value as of the end of the previous collection period. 7 The remaining principal balance of the class B notes on their final scheduled distribution date. 8 Interest on the class C notes. 9 Principal on the class A, B, and C notes until their combined note balance reaches parity with the aggregate securitization value as of the end of the previous collection period. 10 The remaining principal balance of the class C notes on their final scheduled distribution date. 11 Interest on the class D notes. 12 Principal on the class A, B, C, and D notes until their combined note balance reaches parity with the aggregate securitization value as of the end of the previous collection period. 13 The remaining principal balance of the class D notes on their final scheduled distribution date. 14 The noteholders' principal distributable amount (the paydown of the pool over the current collection period), paid sequentially. 15 The reserve account, up to its required level. 16 Pay principal to achieve the target overcollateralization. 17 Any unpaid fees and expenses due to the successor servicer, indenture and owner trustees, and asset representations reviewer. 18 All remaining amounts to the certificateholder. On each payment date after a monetary event of default occurs, after the acceleration of the notes following an event of default, or after the liquidation of the trust estate, the indenture trustee will distribute the available funds according to the payment priority shown in table 2. FEBRUARY 8,

8 Table 2 Payment Waterfall (After Acceleration Following An Event Of Default) Priority Payment 1 Any amounts due and owing to any successor servicer, the indenture and owner trustees, and the asset representations reviewer, without regard to any caps. 2 To the class A noteholders, the note interest amounts, pro rata. 3 To the class A-1 noteholders, the outstanding principal amount of the class A-1 notes until paid in full, and then pro rata to the class A-2, A-3, and A-4 noteholders, the outstanding principal amount of each class until paid in full. 4 To the class B noteholders, the note interest amounts. 5 To the class B noteholders, the outstanding principal amount of the class B notes until paid in full. 6 To the class C noteholders, the note interest amounts. 7 To the class C noteholders, the outstanding principal amount of the class C notes until paid in full. 8 To the class D noteholders, the note interest amounts. 9 To the class D noteholders, the outstanding principal amount of the class D notes until paid in full. 10 To the noteholders, any other amount due and owing under the program documents and not previously distributed. 11 All remaining amounts to the certificateholder 's events of default include nonpayment of note interest, nonpayment of note principal on the respective legal final maturity date, a material default in the observance or performance of a covenant, a material and adverse breach of the representations or warranties, and the issuing entity's bankruptcy or insolvency. Residual Value The series pool will be secured by the series exchange note, which is backed by a pool of leases (and the related leased vehicles) with a securitization value totaling $1,362,401,047. The leases' securitization value is the sum of the present value of each lease's remaining monthly lease payment and the related leased vehicle's base residual value (both discounted at the higher of 6.75% and the contract annual percentage rate). Each leased vehicle's base residual value will equal the lowest of: The contract residual value set by GM Financial; The residual value estimate established by ALG at the lease contract's inception; and ALG's current residual value estimate as of December The contract residual value is the residual value that is assigned to the vehicle at the lease's inception (as stated in the lease contract), which, in turn, determines the monthly payments for the individual lease. The contract residual value is typically set higher than ALG's residual value at lease inception (a process called lease subvention) to reduce the lease payments the lessee owes under the lease contract. The base residual value provides a more conservative estimate of the vehicle's future value, which helps mitigate the noteholders' exposure to the losses associated with lease subvention. The pool's undiscounted base residual value is $1,003,833,322, or 73.68% of the pool's securitization value. FEBRUARY 8,

9 Managed Portfolio As of third-quarter 2017, GM Financial's total U.S. portfolio of retail lease contracts consisted of 1,439,701 contracts totaling approximately $41.4 billion (see table 3). Since 2012, GM Financial's lease portfolio has experienced strong growth, more than doubling each year between 2012 and We expect continued strong growth given that GM Financial has been the exclusive lease provider across all GM brands since April GM Financial's 30-plus-day delinquencies and annualized repossessions outstanding were 1.17% and 1.21%, respectively, for the nine months ended Sept. 30, 2017, compared with 1.03% and 0.74%, respectively, for the nine months ended Sept. 30, Annualized net losses for the period ended Sept. 30, 2017, were 0.36% as a percentage of average lease assets, up from 0.22% for the same period a year ago. Table 3 Total Managed Portfolio Nine months ended Sept. 30 Year ended Dec Lease contracts outstanding (mil. $) 41, , , , , , , Avg. dollar amount of leases outstanding (mil. $) 39, , , , , , No. of contracts outstanding 1,439,701 1,104,426 1,212, , , ,852 49, plus-day delinquencies (%)(i) Repossessions (%)(ii) Net losses (%)(iii) Vehicles returned to GMF (%)(iv) Total loss/(gain) on ALG residuals on vehicles returned to GMF (%)(v) (8.09) (7.04) (5.88) (8.77) (i)as a percentage of the number of contracts outstanding. (ii)as a percentage of the number of lease contracts outstanding, annualized. (iii)as a percentage of the average value of leases outstanding, annualized. (iv)as a percentage of the number of contracts scheduled to terminate. (v)as a percentage of ALG's residual value of returned vehicles sold by GMF. GMF--GM Financial Co. Inc. ALG--Automotive Lease Guide. GM Financial's lease program is still relatively young, so the portfolio data exhibit some volatility. For the nine months ended Sept. 30, 2017, GM Financial experienced total gains of 8.09% on ALG residuals on returned vehicles compared with 7.04% of gains for the same period in Securitization Performance GM Financial's series , , and paid off with cumulative net credit losses of 0.20%, 0.33%, and 0.32%, respectively. The remaining outstanding securitizations--series to , with four to 31 months of performance data--are currently experiencing low losses (see chart 2). We did not rate series , , , , and FEBRUARY 8,

10 Chart 2 The paid-off transactions, , , and , experienced cumulative residual gains of 3.44%, 4.09%, and 3.60%, respectively, as a percentage of the initial base residual. The outstanding series are realizing cumulative residual gains as a percentage of the initial base residual (see chart 3). FEBRUARY 8,

11 Chart 3 On Aug. 4, 2017, we lowered our credit loss expectations on , , , and due to lower-than-expected loss performance compared with our initial expectations (see table 4). We also raised our ratings on the series subordinate class B, C, and D notes to 'AA+ (sf)', 'AA (sf)', and 'A (sf)' from 'AA sf)', 'A+ (sf)', and 'BBB+ (sf)', respectively. Table 4 Collateral Performance (%) As of the January 2018 distribution date Series Mo. Pool factor Current CNL(i) Original lifetime CNL exp. Revised lifetime CNL exp. Current cumulative residual loss/(gain)(ii) (3.10) (1.95) (2.11) (1.10) (0.28) (0.07) (i)percentage of the initial aggregate securitization value. (ii)percentage of the initial aggregate base residual value. FEBRUARY 8,

12 Collateral Analysis The pool consists of 56,399 auto lease receivables with a weighted average FICO score of 759 (see table 5). The top five vehicle series account for approximately 45.8% of the securitization value or approximately 46.9% of the undiscounted base residual. Leases with original terms of 36 months or less make up approximately 57% of the pool. Passenger cars account for approximately 18% of the pool, and SUVs and CUVs make up approximately 62%. Table 5 Original Pool Characteristics (i) (i) No. of leases 56,399 45,285 53,085 54,680 44,161 48,908 44,222 Aggregate securitization value ($) Avg. securitization value ($) Base residual value ($) Avg. base residual value ($) Base residual value as a % of the aggregate securitization value 1,362,401,046 1,090,137,186 1,362,471,925 1,364,563,788 1,084,350,400 1,198,070,363 1,086,121,647 24,156 24,073 25,666 24,955 24,554 24,496 24,561 1,003,833, ,749, ,369, ,786, ,688, ,869, ,711,546 17,799 17,594 17,903 17,973 17,633 17,152 17, New vehicles (%) Vehicle types (%) Car CUV SUV Truck Minivan/station wagon Brand (%) Chevrolet GMC Cadillac Buick Top five by vehicle series (%) Equinox=13.0 Equinox=13.7 Equinox=11.4 Silverado=14.1 N/A Silverado=14.3 Silverado=16.0 Silverado=12.3 Silverado=11.5 Silverado=11.1 Acadia=8.8 N/A Equinox=10.4 Equinox=10.7 Traverse=7.1 Terrain=6.7 Malibu=6.0 Equinox=8.7 N/A SRX=8.0 Acadia=7.2 XT5=7.0 Cruze=6.4 Traverse=5.8 Malibu=6.3 N/A Terrain=6.7 Terrain=7.0 Acadia=6.5 Acadia=5.8 Escalade=5.7 Sierra=5.4 N/A Acadia=6.5 SRX=6.1 Total N/A FEBRUARY 8,

13 Table 5 Original Pool Characteristics (cont.) Weighted avg. original term (mos.) Weighted avg. remaining term (mos.) Weighted avg. seasoning (mos.) (i) (i) Original lease term (%) Less than or equal to 36 mos mos mos Weighted avg. FICO score Top four state concentrations (%) MI=30.0 MI=25.0 MI=18.5 MI=18.9 MI=20.5 MI=20.5 MI=20.8 NY=12.0 NY=12.5 NY=13.6 NY=14.4 NY=13.1 NY=13.9 NY=14.6 CA=9.5 OH=7.4 FL=7.8 CA=7.6 OH=7.7 OH=7.6 OH=7.7 FL=7.2 FL=6.8 OH=7.1 OH=7.1 CA=7.0 FL=6.6 FL=6.5 (i)not rated by S&P Global Ratings. --GM Financial Automobile Leasing Trust. N/A--Not applicable. Collateral Residual Timing The leases in the pool are scheduled to mature as shown in table 6. Table Lease Maturity Profile By Year(i) Year (%) (i)percentage of the aggregate undiscounted base residual value. --GM Financial Automobile Leasing Trust. The pool is diversified in terms of monthly residual maturities. Leases will mature each month beginning in January 2019 (see chart 4). Residual maturities in the pool exceed 5.0% every month from June 2019 through August 2019 and from May 2020 to September The highest percentage of base residual maturities in any three- and six-month period is 16.7% and 31.5%, respectively, which will occur in August and September 2020, respectively. Approximately 3.6% of the residuals are likely to mature within the first 12 months of closing, and 48.3% and 96.3% are anticipated to mature within 24 and 36 months of closing, respectively, with the remaining 3.7% coming due within 43 months of closing. If the used car market becomes further distressed in 2019 and 2020, the realized residual values could be lower than the base residual values. This back-end risk is mitigated by our residual stresses and the transaction's FEBRUARY 8,

14 sequential payment structure, whereby the overcollateralization target and reserve account target amounts will not amortize until all of the notes are paid in full. Chart 4 S&P Global Ratings' Expected Credit And Residual Losses has two principal risk components: credit and residual risks. Credit risk The obligor's credit profile determines the credit risk. To derive the base-case credit loss for the series transaction, we examined the static pool losses on GM Financial's lease portfolio originations segmented by credit profile and by credit profile and lease term, as well as the available securitization credit loss static pool performance. We considered the pool's collateral credit quality, GM Financial's overall managed portfolio performance, collateral and performance comparisons with peers, and the current economic conditions. Based on this information, we expect the pool's cumulative net credit loss will be approximately 0.90% of the pool's securitization value. FEBRUARY 8,

15 Residual risk We examined and assessed residual risk on the pool according to our auto lease criteria, "Revised General Methodology And Assumptions For Rating U.S. ABS Auto Lease Securitizations," published Nov. 29, In our analysis of the series pool's base residual value, we considered the following factors: The historical stability of GM's used vehicle values; The consistency of ALG's historical forecasts versus the actual historical used vehicle values; Brand perception; The residual performance and forecast of the top 10 vehicle models (Silverado, Equinox, Traverse, XT5, Acadia, Terrain, Sierra, Encore, Escalade, and Cruze), which make up approximately 71% of the pool's total base residual value; and Our macroeconomic outlook. Based on these factors, we did not adjust the base residual value. The haircuts that we applied to the base residual value are as follows: Base haircut According to our auto lease criteria, we first applied an initial haircut to the series pool's base residual value commensurate with each rating scenario as shown in table 7. Table 7 Base Residual Haircut Scenario (preliminary rating) AAA (sf) AA+ (sf) A+ (sf) A (sf) Base haircut as a % of undiscounted base residual value Excess concentration haircut In addition to the aforementioned base haircut, we applied a haircut to the amount of nondefaulted lease residuals exceeding the concentration limits applicable to the benchmark pool (excess concentrations) as outlined in our auto lease criteria. The haircut applied to excess concentrations commensurate with each rating scenario is shown in table 8. Table 8 Additional Excess Concentration Haircut(i) Scenario (preliminary rating) AAA (sf) AA+ (sf) A+ (sf) A (sf) Haircut applied to the excess concentration as a % of the undiscounted base residual value The pool has an excess concentration of 4.07%, resulting from eight months with residual maturities exceeding the 5.00% monthly threshold. There is also an excess concentration of 2.67% as a result of the new and discontinued models exceeding the 10.00% threshold. The pool is diversified by vehicle type concentration; therefore, we did not apply an additional haircut on it. The 6.74% total excess concentration is multiplied by the relevant haircut to arrive at the additional haircut percentage at each rating category (see table 9). FEBRUARY 8,

16 Table 9 Benchmark Pool Excess Concentrations Benchmark pool concentration limit Excess concentration One-month maturity exceeding the benchmark (% of undiscounted base residual) June July August May June July August September Individual model (top model=silverado) (%) Full-size and mid-size SUVs, full-size pickup trucks, and vans (%) Compact and hybrid cars (%) New and discontinued models (%) Total excess concentration (%) GM Financial Automobile Leasing Trust. Speculative-grade manufacturer haircut When determining the stress that applies to the adjusted base residual value, we take into account the auto manufacturer's creditworthiness. Our auto lease criteria apply haircuts to the base residual value of the vehicles produced by manufacturers with speculative-grade corporate credit ratings (i.e., 'BB+' or lower). GM is the manufacturer of the leased vehicles backing the pool. The current long-term corporate credit rating on the company is 'BBB'. Based on the corporate credit rating on GM, we do not need to apply a speculative-grade manufacturer haircut to the series transaction under our current auto lease criteria. Low diversification haircut For pools with low diversification, as described in our auto lease criteria, we will apply a low diversification haircut factor of 1.25x in addition to the aforementioned haircuts. Our auto lease criteria describe the six conditions for which, if met by the securitized lease pool, we would apply this type of haircut. These conditions are: More than 20% of the residuals mature in any one month; More than 50% of the residuals mature in any three months; The pool contains three or fewer individual models; The pool contains more than 75% of full-size and mid-size SUVs, full-size pickup trucks, and full-size vans combined; The pool contains more than 75% of compact and hybrid cars combined; and The pool contains more than 20% of new and discontinued models combined. The pool does not meet any of these six conditions; therefore, we did not apply the low diversification haircut. FEBRUARY 8,

17 After analyzing the lease pool, applying the relevant residual value haircuts, and assessing a stressed return rate of 100.0%, which represents the loss frequency on nondefaulted leased vehicles, our stressed residual loss under each rating scenario is shown in table 10. Table 10 Stressed Residual Loss Scenario (preliminary rating) AAA (sf) AA+ (sf) A+ (sf) A (sf) Residual haircut as a % of undiscounted base residual Additional excess concentration haircut (%)(i) Total residual haircut as a % of base residual value Total residual haircut as a % of securitization value (i)the excess concentration haircuts are derived by multiplying the total excess concentration calculated in table 9 by each of the rating category haircuts shown in table 8. Cash Flow Modeling We tested 's proposed structure using cash flow scenarios to determine if the credit enhancement level was sufficient to pay timely interest and principal in full by the notes' legal final maturity dates under our stress scenarios. We modeled the transaction to simulate a stress scenario commensurate with the assigned preliminary ratings. We assumed a 100% vehicle return rate on the nondefaulting leases and no prepayments. The results show that the preliminary rated notes are enhanced to the degree necessary to withstand a level of stressed credit and residual losses that is consistent with the assigned preliminary ratings. For example, the preliminary 'AAA (sf)' rated notes can withstand a cumulative net credit loss of 4.50% of the securitization value (or approximately 5x our expected loss level of 0.90%) and residual losses of 18.02% of the securitization value for a total stress loss of 22.52% (see table 11). Table 11 Cash Flow Assumptions And Results Class A B C D Scenario (preliminary rating) AAA (sf) AA+ (sf) A+ (sf) A (sf) Cumulative net loss (%) Cumulative net loss timing (mos.) 12/24/36 12/24/36 12/24/36 12/24/36 Cumulative net loss (%) 40/80/100 40/80/100 40/80/100 40/80/100 Voluntary prepayments (%) Recoveries (%) Recovery lag (mos.) Residual haircut Total residual haircut as a % of the undiscounted base residual value Total residual haircut as a % of the securitization value Total residual haircut as a % of the MSRP Vehicle return rate (%) FEBRUARY 8,

18 Table 11 Cash Flow Assumptions And Results (cont.) Residual realization lag (mos.) Class A B C D Result S&P Global Ratings' stressed credit and residual loss as a % of the securitization value Approximate credit enhancement available based on S&P Global Ratings' credit stress and break-even residual stress as a % of the securitization value MSRP--Manufacturer's suggested retail price Sensitivity Analysis In addition to running stressed cash flows to analyze the amount of credit and residual losses can withstand, we ran a sensitivity analysis to determine how credit and residual losses, which are in line with a moderate stress scenario, or a 'BBB' rating stress, could affect our ratings on the notes. According to our ratings stability criteria, we will not assign a preliminary 'AAA (sf)' or 'AA+ (sf)' rating if we believe that the rating would decline by more than one rating category in the first year during a moderate stress scenario, and we will not assign a preliminary 'A+ (sf)' or 'A (sf)' rating if we believe that the rating would decline by more than two rating categories in the first year. We will also not assign a preliminary 'AAA (sf)', 'AA+ (sf)', 'A+ (sf)', or 'A (sf)' rating if we anticipate that the rating would decline by more than three rating categories in a three-year horizon under moderate stress conditions. In our view, under the 'BBB' moderate stress scenario, all else equal, we expect that our ratings on the class A notes would not be lowered, and we expect our ratings on the class B notes to remain within one rating category of the assigned preliminary ratings for the transaction's life of the transaction, and our rating on the class C and D notes to not be lowered more than two categories for the transaction's life (see chart 5). FEBRUARY 8,

19 Chart 5 Money Market Tranche Sizing The proposed money market tranche (the class A-1 notes) has a 12-month legal final maturity date (Feb. 20, 2019). To test whether the money market tranche can be repaid by month 12, we ran cash flows using assumptions to delay the principal collections during the 12-month period. In our cash flow run, we assumed zero defaults and a zero absolute prepayment speed on all leases. We also stressed the recognition of the monthly lease payments and base residual amounts by applying a one- and two-month lag, respectively. Based on our stressed cash flow runs, approximately nine months of collections would be sufficient to pay off the money market tranche. The collections used in assessing the money market tranche for rely on the monthly lease payments that come due during the transaction's life, lagged by one month. No collections from residual maturities were factored into our money market assessment because residual maturities do not begin until January 2019, and after applying a two-month lag to the residual collections, such collections would be recognized after the money market tranche matures or pays off. FEBRUARY 8,

20 Legal Final Maturity To test the legal final maturity dates set for the longer-dated tranches (classes A-2 through C), we determined the date on which the respective notes were fully amortized in a zero-loss, zero-prepayment scenario and then added six months to the result. We also verified that the notes were paid off in our rating-specific stressed cash flow scenarios by their legal final maturity dates. For the longest-dated security, class D, we added seven months to the tenor of the pool's latest-maturing receivable to accommodate extensions and residual realization on the receivables. In each cash flow scenario, we confirmed there is sufficient credit enhancement both to cover losses and to repay the related notes in full by their legal final maturity date. GM Financial GM Financial (BBB/Stable/--) is a wholly owned subsidiary of General Motors Financial Co. Inc., which is a wholly owned subsidiary of General Motors Holdings LLC, which is, in turn, a wholly owned subsidiary of GM (BBB/Stable/--). GM is a U.S. corporation that globally produces passenger cars, CUVs, SUVs, and heavy-, medium-, and light-duty trucks. GM Financial is a Delaware corporation formed on July 22, It is headquartered in Fort Worth, Texas. GM Financial offers lease financing products for new GM vehicles through its regional credit centers and dealer relationship managers and has active dealer agreements with the vast majority of GM dealerships. The dealers originate leases that conform to GM Financial's credit policies, and GM Financial then purchases and services the leases and the associated leased vehicles, generally without recourse to the dealers. Related Criteria General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017 Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - RMBS: U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter, April 30, 2012 Criteria - Structured Finance - ABS: Revised General Methodology And Assumptions For Rating U.S. ABS Auto Lease Securitizations, Nov. 29, 2011 Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, FEBRUARY 8,

21 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By Code Transferors, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues Criteria, Oct. 1, 2006 Criteria - Structured Finance - ABS: Assessing the Risk of Pension Plan Terminations on U.S. Auto Lease Securitizations, Aug. 17, 2004 Related Research Three Ratings Raised, Two Ratings Affirmed On GM Financial Automobile Leasing Trust , Aug. 4, 2017 General Motors Co. And General Motors Financial Co. Inc. Upgraded To 'BBB' On Improved Performance, Outlook Stable, Jan. 10, 2017 Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects of The Top Five Macroeconomic Factors, Dec. 16, 2016 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, Analytical Team Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com FEBRUARY 8,

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