Prestige Auto Receivables Trust

Transcription

1 Presale: Prestige Auto Receivables Trust This presale report is based on information as of Oct. 13, 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 As Of Oct. 13, 2016 Class Preliminary rating(i) Type Interest rate Preliminary amount (mil. $)(ii) Legal final maturity A-1 A-1+ (sf) Senior Fixed Nov. 15, 2017 A-2 AAA (sf) Senior Fixed July 15, 2020 A-3 AAA (sf) Senior Fixed Jan. 15, 2021 B AA (sf) Subordinate Fixed Nov. 15, 2022 C A (sf) Subordinate Fixed Nov. 15, 2022 D BBB (sf) Subordinate Fixed Nov. 15, 2022 E BB (sf) Subordinate Fixed 8.32 Aug. 15, 2023 (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the actual size of these tranches will be determined on the pricing date. Profile Expected closing date Oct. 27, Collateral Subprime auto loan receivables. Issuer Prestige Auto Receivables Trust Contributor, servicer, and custodian Depositor Indenture trustee and backup servicer Prestige Financial Services Inc., a Utah corporation. Prestige Receivables Corp. II, a special-purpose corporation established under the laws of Delaware. Citibank N.A. (A/Watch Pos/A-1). Primary Credit Analyst: Timothy J Moran, CFA, FRM, New York (1) ; timothy.moran@spglobal.com Secondary Contact: Ethan Choi, New York (1) ; ethan.choi@spglobal.com See complete contact list on last page(s) OCTOBER 13,

2 Profile (cont.) Owner trustee Lead underwriter Wells Fargo Delaware Trust Co. N.A. Wells Fargo Securities LLC. Credit Enhancement Summary Prestige Auto Receivables Trust Preliminary rating Class A AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) Class B AA (sf) AA (sf) AA (sf) AA (sf) AA+ (sf) Class C A (sf) A (sf) A (sf) A (sf) A+ (sf) Class D BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf) Class E BB (sf) BB (sf) BB (sf) N/A N/A Subordination (% of the initial receivables) AAA AA A BBB N/A N/A BB N/A N/A N/A N/A N/A Overcollateralization Initial (% of the initial receivables) Target (% of the current receivables) Floor (% of the initial and prefunded receivables) Reserve account Initial (% of the initial receivables) Target (% of the current receivables) Floor (% of the initial and prefunded receivables) Total initial hard credit enhancement (% of the initial receivables) Class A Class B Class C Class D Class E N/A N/A Excess spread per year (%) (estimated)(i) Original expected loss range (%) Revised expected loss range (%) N/A N/A (i)the excess spread calculations are based on a servicing fee of 2.75%. N/A--Not applicable. OCTOBER 13,

3 Rationale The preliminary ratings assigned to Prestige Auto Receivables Trust 's (PART 's) $343.6 million automobile receivables-backed notes series reflect: The availability of approximately 48.9%, 43.4%, 34.5%, 24.7%, and 21.4% of credit support for the class A, B, C, D, and E notes, respectively (based on stressed cash flow scenarios, including excess spread), which provides coverage of more than 3.50x, 3.00x, 2.30x, 1.75x, and 1.50x our 13.00%-13.75% expected cumulative net loss range for the class A, B, C, D, and E notes, respectively. These credit support levels are commensurate with the assigned preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB (sf)' ratings on the class A, B, C, D, and E notes (for more information, see the S&P Global Ratings' Expected Loss and Cash Flow Modeling sections below). Our expectation that under a moderate, or 'BBB', stress scenario, our preliminary ratings on the class A, B, C, D, and E notes would not decline by more than one rating category (all else being equal). These potential rating movements are consistent with our credit stability criteria, which outline the outer bound of credit deterioration equal to a one-category downgrade within the first year for 'AAA' and 'AA' rated securities, and a two-category downgrade within the first year for 'A' through 'BB' rated securities under moderate stress conditions (see "Methodology: Credit Stability Criteria," published May 3, 2010). The credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread (for more information, see the Credit Enhancement Summary table above). The timely interest and ultimate principal payments made under the stressed cash flow modeling scenarios, which are consistent with the assigned preliminary ratings. The collateral characteristics of the securitized pool of subprime auto loans. Prestige Financial Services Inc.'s (Prestige's) securitization performance history since The transaction's payment and legal structures. Transaction Overview The PART issuance is Prestige's second securitization in The series transaction closed in March The series transaction is structured as a true sale of the receivables to Prestige Receivables Corp. II (PRC II) from Prestige, the originator. By way of a further true sale, PRC II will sell the assets it acquires to the trust, a bankruptcy-remote special-purpose entity. The trust will then pledge its interest in the receivables to the indenture trustee on the noteholders' behalf (see chart 1). OCTOBER 13,

4 We expect principal and interest payments on the PART notes to begin on Nov. 15, 2016, and subsequent payments to be made on the 15th day or the following business day of each month. The class A, B, C, D, and E notes will each be paid a fixed interest rate and receive principal sequentially, as described in the Transaction Structure section below. In rating this transaction, S&P Global Ratings will review the relevant legal matters and opinions outlined in its criteria. Changes From The PART Transaction The major credit enhancement changes from the series transaction include the following: Our expected net loss range increased to 13.00%-13.75% from 12.25%-12.75% due primarily to the worsening performance observed in the most recent outstanding securitizations and in the origination static pools. To offset higher expected losses, hard credit enhancement at closing increased by 630 basis points (bps), 510 bps, 360 bps, 115 bps, and 250 bps for classes A, B, C, D, and E, respectively. OCTOBER 13,

5 The initial overcollateralization increased by 250 bps to 7.00%, from 4.50% of the initial pool balance, while the target overcollateralization decreased slightly to 13.10%, from 13.15% of the current pool balance, while the floor remained at 2.00% of the initial pool balance. The subordination for the class A notes increased 380 bps to 34.50% from 30.70%. The subordination for the class B notes increased 260 bps to 25.50% from 22.90%. The subordination for the class C notes increased 110 bps to 12.50% from 11.40%. The subordination for the class D notes decreased 135 bps to 2.25% from 3.60%. The collateral composition changes from the series transaction include the following: The percentage of Chapter 7 and Chapter 13 bankruptcy collateral decreased to 41.6% from 47.3%. Static pool data indicate that bankruptcy collateral typically exhibits lower losses than nonbankruptcy collateral; we therefore consider a decrease in the percentage of such collateral as negative. The percentage of collateral originated at Larry H. Miller dealerships decreased to approximately 7.2% from 7.5%. The average original amount financed increased to $17,904 from $17,883. The weighted average loan-to-value (LTV) remained flat at approximately 132.8% compared with 132.7%. The percentage of new vehicles increased to approximately 8.3% from 7.1%. The deal is subject to a prefunding period ending on Feb. 10, 2017, and any collateral prefunded during that time is subject to certain eligibility parameters. The series parameters compared with those of series are as follows: A weighted average original term of no greater than 70 months, which matches the series parameter. An aggregate amount of bankruptcy collateral of at least 41.50% of the aggregate principal balance of the pool, down from 45.00%. A non-zero weighted average obligor credit score (as of the time the related receivables were originated) of at least 525, which matches the series parameter. A weighted average original loan amount as a percentage of the wholesale value of the financed vehicle of no more than %, which matches the series parameter. A weighted average loan payment as a percentage of the obligor's income will be no more than 11.00%, which matches the series parameter. A weighted average annual percentage rate (APR) of no less than 18.50%, up from 18.10%. Transaction Structure The PART transaction incorporates the following structural features: A sequential payment structure in which the subordinate note classes will provide nonamortizing credit enhancement to the senior classes; A prefunding account that will be funded with approximately $68.72 million from the sale of the notes; this amount is approximately 20% of the total note balance. The prefunding period ends on Feb. 10, An initial 7.00% overcollateralization amount that will build to a target of 13.10% of the current pool balance by applying excess spread, subject to a floor of 2.00% of the initial and prefunded pool balance; A reserve account that will be funded with an initial deposit of 1.00% of the initial pool balance and a deposit of 1.00% of subsequent receivables as of the related cutoff dates during the prefunding period, and will be nondeclining throughout the transaction's life; and OCTOBER 13,

6 A mechanism for paying principal to ensure that the senior notes do not exceed the collateral balance before paying subordinate interest. Payment Structure Distributions will be made from the available funds according to a specific priority (see table 1). Table 1 Payment Waterfall Priority Payment 1 The indenture trustee and owner trustee fees, and to the owner trustee, the indenture trustee, and the backup servicer, any reasonable indemnities and out-of-pocket expenses (including, without limitation, attorneys' fees and expenses and any conversion fees), provided, however, that such expenses, excluding conversion fees, will be limited to $150,000 and conversion fees will be limited to $30, To the servicer, the 2.75% servicing fee and expenses, including the conversion fees of any successor servicer other than the backup servicer, to reimburse the servicer for any unreimbursed servicer advances and to pay the custodian expenses permitted under the custodian agreement. 3 Class A note interest. 4 Principal to the extent necessary to reduce the class A note principal balance to the pool balance. 5 The remaining principal balance, paid sequentially, of any outstanding class A notes on their respective final scheduled distribution date. 6 Class B note interest. 7 Principal to the extent necessary to reduce the combined class A and B note principal balance to the pool balance. 8 The remaining principal balance of any outstanding class B notes on their final scheduled distribution date. 9 Class C note interest. 10 Principal to the extent necessary to reduce the combined class A, B, and C note principal balance to the pool balance. 11 The remaining principal balance of any outstanding class C notes on their final scheduled distribution date. 12 Class D note interest. 13 Principal to the extent necessary to reduce the combined class A, B, C, and D note principal balance to the pool balance. 14 The remaining principal balance of any outstanding class D notes on their final scheduled distribution date. 15 Class E note interest. 16 Principal to the extent necessary to reduce the combined class A, B, C, D, and E note principal balance to the pool balance. 17 The remaining principal balance of any outstanding class E notes on their final scheduled distribution date. 18 To the reserve account, the amount necessary to reach the required level. 19 To the noteholders, the regular principal distributable amount. 20 To the owner trustee, indenture trustee, and backup servicer, any fees and expenses due that are in excess of the related cap on each. 21 To any successor servicer, the additional servicing compensation, if applicable. 22 Any remaining amounts to or at the direction of the issuer. The above payment priorities may change if a credit event of default (namely, a failure to pay interest on the controlling note class, a failure to pay principal at final maturity, or the trust's bankruptcy) or a non-credit event of default (namely, a material breach of a representation, warranty, or covenant) occurs and persists. The indenture trustee may accelerate the notes, and shall do so if so directed in writing by noteholders holding a majority of the outstanding amount of the controlling note class. The trust estate may also be liquidated, but only if a OCTOBER 13,

7 credit event of default occurs, if noteholders holding a majority of the outstanding amount of the controlling note class consents, and one of the following occurs: The sale or liquidation proceeds are sufficient to ensure all noteholders are paid in full; All noteholders consent to the sale; or The indenture trustee determines that the trust estate will not provide sufficient funds to pay the noteholders in full on an ongoing basis and obtains the consent to the sale from two-thirds of the principal amount of the outstanding notes. If the notes are accelerated following a non-credit event of default, then distributions will be made from the available funds according to the payment priority shown in table 1. However, there will be no cap on expenses and indemnities in item 1 of the waterfall, and payment of the regular principal distributable amount in item 19 will include all available funds until the total note balance has been reduced to zero. If the notes are accelerated following a credit event of default, or if the trust estate is sold following the exercise of remedies after a credit event of default, then distributions will be made from the available funds according to the following payment priority (see table 2). Table 2 Credit Event Of Default Payment Waterfall Priority Payment 1 To the trustees, any trustee fees and expenses as well as any expenses owed to the backup servicer without cap. 2 To the servicer, any servicing fee and expenses as well as any expenses owed to the custodian. 3 Class A note interest pari passu among the class A-1, A-2, and A-3 notes. 4 To class A-1 noteholders, principal until class A-1 is paid in full. 5 To class A-2 and A-3 noteholders, principal paid pari passu until all A classes are paid in full. 6 Class B note interest. 7 To class B noteholders, principal until class B is paid in full. 8 Class C note interest. 9 To class C noteholders, principal until class C is paid in full. 10 Class D note interest. 11 To class D noteholders, principal until class D is paid in full. 12 Class E note interest. 13 To class E noteholders, principal until class E is paid in full. 14 To any successor servicer, the additional servicing compensation, if applicable. 15 Any remaining amounts to or at the direction of the issuer. Securitization Performance/Surveillance Following its first securitization--an unwrapped, two-class issuance in Prestige issued six bond-insured securitizations from , all of which have paid off. The company's first three senior-sub transactions, the series , , and pools, have also paid off. According to our calculations, the paid-off cumulative net losses for the pools range from 5.88% on the series pool to 15.82% on the series pool (see chart 2). The series pool experienced the highest cumulative net losses, which we attribute to not only the effects of the OCTOBER 13,

8 recession but also the pool's low percentage of bankruptcy collateral (13.1%) compared with the other paid-off pools. Chart 2 Chart 3 Prestige currently has four outstanding securitizations: series , , , and The series transaction, after 42 months of performance, has 11.08% of cumulative net losses and a pool factor of approximately 18.25%. The series transaction, after 31 months of performance, has 9.49% of cumulative net losses and a pool factor of approximately 34.22%. The series transaction, after 19 months of performance, has 5.23% of cumulative net losses and a pool factor of approximately 57.44%. The series transaction, after seven months of performance, has 1.25% of cumulative net losses and a pool factor of approximately 86.09%. We are currently projecting that the series transaction will lose approximately 12.25%-12.75%, while the series and pools will lose approximately 13.00%-13.75% (see table 3 below). We based these loss projections on loss curves derived from the paid-off Prestige transactions, while attempting to control for the series and transactions' higher seasoning than that of their predecessors. Table 3 Performance Data For Outstanding Prestige Auto Receivables Trust Transactions Transaction/series Month Pool factor (%) CNL (%)(i) 60-plus-day delinquency (%) Initial lifetime CNL % projection Revised projected lifetime CNL % as of October N/A (i)s&p Global Ratings' calculated cumulative net losses as the total defaulted receivables less net liquidation/recovery proceeds as a percent of the initial aggregate pool balance. CNL--Cumulative net loss. N/A--Not applicable. We have revised our projections for the lifetime cumulative net losses of the series , , and higher than we initially projected. Although loss expectations are higher, the credit enhancement for each transaction as a percentage of the outstanding pool has grown since closing (see table 4). We will continue to monitor these transactions' performance to determine if the assigned ratings remain sufficient and take any rating actions we deem OCTOBER 13,

9 appropriate. Table 4 Hard Enhancement For Outstanding PART Transactions(i) Transaction/series Class Initial hard enhancement (%) Current hard enhancement as a percentage of current pool balance (%) B C D A B C D A B C D E (i)hard enhancement includes subordination, overcollateralization, and reserve. PART--Prestige Auto Receivables Trust. The series and pools' cumulative net losses are currently tracking higher than those of the pool, albeit with approximately one to two months higher seasoning than the latter. The pool's cumulative net losses are currently tracking higher than those of the and pools and much higher than those of the pool, albeit with less seasoning than the , , and pools (see chart 3, above). We attribute the higher losses to not only increased competition and credit normalization but also the company's post-recession strategy of growth by expanding its territory and dealership base. The company has had past experience with such growth and the higher losses that can result from adverse selection at the dealership level in areas of expansion. It therefore attempted to prepare for this by adjusting its scorecard for those areas as it entered them while tightening its overall scorecard in spring After losses from those areas came in even higher than expected, the company again tightened its scorecard in all states (spring 2014), this time for non-open bankruptcy applications, which effectively shifted origination concentrations toward open bankruptcy paper. As we explain below, such paper typically performs better than non-bankruptcy paper. The latest version of the company's internal scorecard, which was built in consultation with an external risk modeling firm, went live in the fourth quarter of 2015, and the company introduced some modest tightening in underwriting in early Managed Portfolio As of June 30, 2016, Prestige's serviced portfolio was approximately $1,014.4 million, a 15% increase since June 30, Total 30-plus-day delinquencies increased to 4.7% of the outstanding loan balance as of June 30, 2016, from 4.0% as of June 30, Annualized net losses as a percentage of the average amount outstanding increased to 4.4% as of June 30, 2016, from 3.6% as of June 30, 2015 (see table 5). Both delinquencies and net charge-offs remain well below their 2009 peak. Portfolio size has grown since 2011 after declining from its mid-2008 high point. We expect the OCTOBER 13,

10 delinquency and net loss performance to worsen modestly on a year-over-year basis commensurate with portfolio growth and credit normalization. Table 5 Managed Portfolio As of June 30 As of Dec. 31 Delinquency experience Portfolio at end of period (mil. $) 1, plus-day delinquencies as a % of the portfolio(i) For the period ended June 30 For the period ended Dec. 31 Loan loss experience Avg. month-end amount outstanding during the period (mil. $) Net charge-offs as a % of the avg. month-end amount outstanding Static pool performance by segment The static cumulative net losses by annual vintage on the company's managed portfolio are shown below on an aggregate basis (see charts 4 and 5), as well as broken out by bankruptcy and non-bankruptcy collateral (see charts 6 and 7). These show improved performance since mid-2008, although, as we expected, recent performance has worsened as credit conditions continue to normalize. Prestige looks for obligors whose credit history displays a period of good credit followed by a period of poor credit, which may include a recent bankruptcy, but who now demonstrate either positive payment behaviors or strong potential to establish such behaviors. The individuals whom Prestige typically finances under its bankruptcy program have generally suffered a life event, such as medical issues, a layoff, overextension, or a divorce, that caused a temporary financial setback leading to the bankruptcy filing. In our view, Prestige's bankruptcy collateral tends to perform better than its non-bankruptcy collateral because obligors generally emerge from the U.S. Bankruptcy Code process in the case of Chapter 7 with all or most debts discharged, or in the case of Chapter 13 with a plan to repay creditors over a period of usually three to five years. The obligor's credit rating will, however, have suffered significantly as a result of the bankruptcy, and therefore credit will be harder and more expensive to obtain. An additional consideration is that an obligor cannot receive a second discharge in any Chapter 7 bankruptcy petition that is filed within eight years from the date that the first Chapter 7 petition was filed. For Chapter 13 bankruptcy, an obligor is not eligible for a discharge if a previous discharge was received under Chapter 7 within the prior four-year period, or, if the prior discharge was received under Chapter 13, within the prior two-year period. As a result, the obligor is usually eager to re-establish creditworthiness by demonstrating good payment behaviors going forward. Our loss projections for Prestige's bankruptcy versus non-bankruptcy program are noted below (see table 6). OCTOBER 13,

11 Table 6 Origination Static Pool Observations (%) Bankruptcy program Q1-Q Q1-Q Q1-Q Q1-Q Projected loss range Weighted average Non-bankruptcy program Projected loss range Weighted average Chart 4 Chart 5 OCTOBER 13,

12 Chart 6 Chart 7 Pool Analysis As of the initial cutoff date on Sept. 30, 2016, the collateral pool consisted of approximately $295.6 million in auto loans. The pool consists of current production loans originated almost entirely in 2016 (see table 7). Collateral up to a value of approximately $73,892,219 can be added during the prefunding period, which will end on Feb. 10, As mentioned in the Changes From The PART Transaction section above, the final aggregate pool, comprising the prefunded collateral and the statistical pool, must comply with certain eligibility requirements, which we account for in our expected loss. Table 7 Collateral Comparison Prestige Auto Receivables Trust (i) Receivables balance (mil. $) No. of receivables 18,147 18,736 24,537 23,461 20,093 17,100 Avg. original loan balance ($) 17,904 17,883 18,900 17,971 18,102 18,291 Weighted avg. PTI (%) Weighted avg. APR (%) Weighted avg. original term (mos.) Weighted avg. remaining term (mos.) Weighted avg. seasoning (mos.) Original term greater than 60 mos. (%) Weighted avg. LTV (%) % of new vehicles % of used vehicles Bankruptcy receivables (%) OCTOBER 13,

13 Table 7 Collateral Comparison (cont.) Prestige Auto Receivables Trust (i) Vehicle type breakout (%) Car SUV Van/truck Top three state concentrations (%) IL=8.9 IL=10.3 IL=10.5 TX=12.0 TX=11.8 AZ=15.6 TX=7.9 TX=7.8 TX=10.4 IL=9.3 IL=10.8 TX=15.0 AZ=7.5 OH=7.2 OH=8.3 OH=7.2 AZ=9.6 IL=9.4 (i)as of initial cutoff date of Sept. 30, All other pool cuts include prefunding, except PTI--Payment to income. APR--Annual percentage rate. LTV--Loan-to-value. N/A--Not applicable. S&P Global Ratings' Expected Loss: 13.00%-13.75% To derive the base-case loss for the series transaction, we reviewed the cumulative net loss performance and loss projections for quarterly origination vintage static pools. Performance peaked with low loss levels in the 2009 monthly origination vintages following the company's credit tightening in mid After this, and as expected, we observed a year-over-year decline in the performance of both the bankruptcy and non-bankruptcy quarterly origination vintages starting with the 2010 vintages as the company has normalized underwriting in response to the improved economic environment and increased competition. We also analyzed the cumulative net loss performance of Prestige's paid-off securitized pools for , the loss projections on the outstanding series , , and securitized pools, and the series securitized pool's current performance. In our analysis, we also considered the series pool's credit quality and compared it with that of Prestige's previous pools. Worsening performance exhibited by the origination net loss static pools as well as higher losses on the series , , , and pools contributed to our higher expected loss number on this deal. The series pool has a lower percentage of bankruptcy collateral among the securitized pools, and we have also observed higher losses in the bankruptcy origination net loss static pools. In addition, it has the highest weighted average LTV. We also accounted for the addition of highly seasoned collateral, which was originated largely in 2011 and As a result, we believe its remaining losses should generally be lower than those of nonseasoned collateral. Therefore, based on our review of the securitization performance, the quarterly origination static pool data, and the pool characteristics, we expect the series transaction to experience cumulative net losses in the 13.00%-13.75% range. OCTOBER 13,

14 Cash Flow Modeling We modeled the transaction to simulate rated stress scenarios appropriate for the assigned preliminary ratings (see table 8). Table 8 Cash Flow Assumptions And Results Class A B C D D Preliminary rating AAA (sf) AA (sf) A (sf) BBB (sf) BB (sf) Cumulative net loss timing (mos.) Cumulative net loss timing (%) ABS voluntary prepayments (%) 12/24/36 12/24/36 12/24/36/48/60 12/24/36/48/60 12/24/36/48/60 37/98/100 27/75/100 20/57/82/99/100 20/55/79/98/100 20/55/79/98/ Recoveries (%) Recovery lag (mos.) Servicing fee (%) Weighted avg. APR drift (bps) Approximate break-even levels (%)(i) (3) (3) (3) (3) (3) (i)the maximum cumulative net losses on the pool that the transaction can withstand without triggering a payment default on the relevant note classes. ABS--Absolute prepayment speed. APR--Annual percentage rate. Bps--Basis points. For several years, Prestige has used a customer rewards program under which it can reduce a borrower's APR by up to 0.5% for every consecutive three-month period that the borrower makes on-time payments and maintains full-coverage insurance, up to a maximum 2.0% reduction each year. The minimum APR allowed under the rewards program is 14.0%, and no borrower who has an APR less than or equal to 14.0% can qualify for the program. To account for this program in our stress runs, we modeled a weighted average drift of -3 bps per month based on the monthly origination static pool data that Prestige provided to us. The break-even results show that the preliminary rated class A through E notes are credit-enhanced to the degree necessary to withstand a stressed net loss level consistent with the assigned preliminary ratings. Sensitivity Analysis In addition to running break-even cash flows, we ran a sensitivity analysis to see how higher-than-expected losses can affect the preliminary ratings on the notes (see table 9 and chart 8). Table 9 Scenario Analysis Summary Stress multiple (x) 1.75 Loss level (%) OCTOBER 13,

15 Table 9 Scenario Analysis Summary (cont.) Cumulative loss timing (month 12/24/36/48/60) (%) Voluntary ABS (%) 1.0 Recoveries (%) 40.0 Recovery lag (mos.) 5 Servicing fee (%) 2.75 Weighted avg. APR drift (bps) (3) 24/59/88/98/100 Coverage of remaining losses 'AAA (sf)' preliminary rated notes 'AA (sf)' preliminary rated notes 'A (sf)' preliminary rated notes 'BBB (sf)' preliminary rated notes 'BB (sf)' preliminary rated notes 2.58x at month one, builds to 3.01x by month 12, and continues to grow thereafter 2.20x at month one, builds to 2.51x by month 12, and continues to grow thereafter 1.65x at month one, builds to 1.79x by month 12, and continues to grow thereafter 1.21x at month one, builds to 1.24x by month 6, then declines to 1.20x by month 15 where it remains through month 16, and then grows thereafter 1.12x at month one, builds to 1.14x by month 6, then declines to 1.05x by month 17 where it remains through month 22, and then grows thereafter ABS--Absolute prepayment speed. APR--Annual percentage rate. Bps--Basis points. Chart 8 OCTOBER 13,

16 Sensitivity analysis: 23.63% cumulative net loss results Under the 23.63% stressed loss scenario, which is approximately 1.75x our expected loss level, the transaction reaches the 13.10% overcollateralization target in month 6 and remains at the target level through month 22. The overcollateralization floor level is reached around month 34, although it dips below it from month 35 and never returns to its floor level. During the months when the transaction is at the overcollateralization target, it releases excess cash flow. The transaction thus releases excess cash flow from months Interest is paid on a timely basis, and the class A-1, A-2, A-3, B, C, D, and E notes are paid principal in full in months 6, 21, 25, 31, 43, 62, and 66, respectively. Our sensitivity analysis allows us to simulate a moderate, or 'BBB', loss scenario to determine the degree to which the ratings are susceptible to a negative rating action. Given these results, all else being equal, we expect our ratings on the class A, B, C, D, and E notes to remain within one rating category of our 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB (sf)' ratings, respectively. This is within our rating stability criteria, which express theoretical outer bounds for the projected credit deterioration of any given security under specific, hypothetical stress scenarios over a one-year period as one rating category for 'AAA' and 'AA' rated securities and two rating categories for 'A' and 'BBB' rated securities (for more information, see "Methodology: Credit Stability Criteria," published May 3, 2010). Money Market Tranche Sizing The proposed money market tranche (class A-1) has a 13-month legal final maturity date (Nov. 15, 2017). To test whether the money market tranche can be repaid by month 13, we ran cash flows using assumptions to delay the principal collections during the 13-month time period. We assumed zero defaults and a 0.25 bps absolute prepayment speed for our cash flow run, and we checked that approximately 12 months of principal collections would be sufficient to pay off the money market tranche. Legal Final Maturity To test the legal final maturity dates set for classes A-2, A-3, B, C, and D, we determined the date on which the respective notes were fully amortized in a zero-loss, zero-prepayment scenario and then added three months to the result. Furthermore, in the break-even scenario for each respective rating level, we confirmed that there was sufficient credit enhancement both to cover losses and to repay the related notes in full by legal final maturity. We calculated the legal final maturity for class E by adding 72 months (the longest loan term), the approximately three-month prefunding period, and an additional six months to accommodate recoveries and extensions. Prestige Prestige was incorporated under the laws of Utah in September 1994, and is one of the entities that constitute the Larry H. Miller Group of Companies (the Miller Group). The Miller Group is a group of legally separate companies that Mrs. Karen G. Miller, widow of the late Mr. Larry H. Miller, owns, controls, or operates individually and as sole trustee OCTOBER 13,

17 of a certain trust. In addition to Prestige, the Miller Group includes more than 60 automobile dealerships in the western U.S., the National Basketball Assn.'s Utah Jazz, the Vivint Smart Home Arena, Jordan Commons (a 359,000-sq.-ft. office and entertainment complex), more than 15 large movie theater complexes, more than 100 Fanzz retail sports apparel stores in more than 20 states, the Salt Lake Bees baseball team (a member of the Pacific Coast League and Triple A affiliate of Major League Baseball's Angels), a radio station, three insurance companies, and numerous other real estate and business ventures. At year-end 2015, the Miller Group had an estimated $3.4 billion in total assets and an estimated $5.3 billion in total revenues, and it employed more than 11,000 people. Under the guidance of a board of directors, Miller Management Corp. generally oversees the financial services-related entities within the Miller Group. Prestige operates under this management umbrella as a stand-alone legal entity with separate operational management. Prestige is a financial services company specializing in automobile financing. It acquires and services retail automobile installment purchase contracts secured by either new or used vehicles that both Miller Group and non-miller Group dealerships generate. Prestige's target market is credit-impaired buyers who have offsetting strengths, such as relatively stable employment, income, and residential history, as well as a history of paying previous credit as agreed. Related Criteria And Research Related Criteria Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 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 Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011 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, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues 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: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By Code Transferors, Oct. 1, 2006 Related Research Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 Two Prestige Auto Receivables Trust Ratings Raised, 18 Affirmed On Four Transactions, May 8, 2015 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 OCTOBER 13,

18 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, The primary analyst would like to thank Jenna Cilento, Jie Liang, and Kevin Bach for their analytical contributions to this presale report. Analytical Team Primary Credit Analyst: Timothy J Moran, CFA, FRM, New York (1) ; timothy.moran@spglobal.com Secondary Contact: Ethan Choi, New York (1) ; ethan.choi@spglobal.com OCTOBER 13,

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