Prestige Auto Receivables Trust

Transcription

1 Presale: Prestige Auto Receivables Trust Primary Credit Analyst: Timothy J Moran, CFA, FRM, New York (1) ; timothy.moran@standardandpoors.com Secondary Contact: Peter W Chang, CFA, New York (1) ; peter.chang@standardandpoors.com Table Of Contents $ Million Automobile Receivables-Backed Notes Series Rationale Transaction Overview Changes From The PART Transaction Transaction Structure Payment Structure Securitization Performance/Surveillance Managed Portfolio Pool Analysis Standard & Poor's Expected Loss: 12.25%-12.75% Cash Flow Modeling Sensitivity Analysis MARCH 11,

2 Table Of Contents (cont.) Money Market Tranche Sizing Legal Final Maturity Prestige Related Criteria And Research MARCH 11,

3 Presale: Prestige Auto Receivables Trust $ Million Automobile Receivables-Backed Notes Series This presale report is based on information as of March 11, 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 March 11, 2016 Class Preliminary rating(i) Type Interest rate Preliminary amount (mil. $)(ii) Legal final maturity A-1 A-1+ (sf) Senior Fixed April 17, 2017 A-2 AAA (sf) Senior Fixed Aug. 15, 2019 A-3 AAA (sf) Senior Fixed June 15, 2020 B AA (sf) Subordinate Fixed Nov. 16, 2020 C A (sf) Subordinate Fixed Nov. 15, 2021 D BBB (sf) Subordinate Fixed Nov. 15, 2021 E BB (sf) Subordinate Fixed March 15, 2023 (i)the rating on each class of securities is preliminary and subject to change at any time. Profile Expected closing date March 23, Collateral Subprime auto loan receivables. Issuer Prestige Auto Receivables Trust Contributor, servicer, and custodian Prestige Financial Services Inc., a Utah corporation. Depositor Prestige Receivables Corp. II, a special-purpose corporation established under the laws of Delaware. Indenture trustee and backup servicer Citibank N.A. (A/Watch Positive/A-1). Owner trustee Wells Fargo Delaware Trust Co. N.A. Lead underwriter J.P. Morgan Securities LLC. Credit Enhancement Summary Prestige Auto Receivables Trust Preliminary rating Class A AAA (sf) AAA (sf) AAA (sf) AAA (sf) Class B AA (sf) AA (sf) AA (sf) AA+ (sf) Class C A (sf) A (sf) A (sf) A+ (sf) Class D BBB (sf) BBB (sf) BBB (sf) BBB (sf) Class E BB (sf) BB (sf) N/A N/A Subordination (% of the initial receivables) AAA MARCH 11,

4 Credit Enhancement Summary (cont.) AA A BBB N/A N/A BB N/A N/A N/A N/A Overcollateralization Initial (% of the initial receivables) Target (% of the current receivables) Floor (% of the initial receivables) Reserve account Initial (% of the initial receivables) Target (% of the current receivables) Floor (% of the initial 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. Rationale The preliminary ratings assigned to Prestige Auto Receivables Trust 's (PART 's) automobile receivables-backed notes series reflect our view of: The availability of approximately 44.3%, 38.7%, 29.8%, 24.2%, and 22.0% 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 12.25%-12.75% 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 Standard & Poor's 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). MARCH 11,

5 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 first securitization in 2016 and its first since the series transaction, which 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). We expect principal and interest payments on the PART notes to begin on April 15, 2016, and subsequent MARCH 11,

6 payments to be made on the 15th business 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, Standard & Poor's Ratings Services 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 12.25%-12.75% from to 11.25%-11.75% due primarily to the worsening performance observed in the most recent outstanding securitizations and in the origination static pools. The subordination for the class A notes increased to 30.70% from 28.50%. The subordination for the class B notes increased to 22.90% from 21.50%. The subordination for the class C notes increased to 11.40% from 11.00%. The subordination for the class D notes increased to 3.60% from 2.00%. The initial overcollateralization increased to 4.50% from 3.50% of the initial pool balance, while the target overcollateralization increased to 13.15% from 8.50% of the current pool balance, and the floor increased to 2.00% from 1.50% of the initial pool balance. According to the coupon guidance, the estimated annual time-weighted cost of debt increased to 3.92% from 2.83% (the series transaction priced at 2.10%); coupled with the slight increase in the estimated weighted average annual percentage rate (APR) to 18.34% from 18.17%, the estimated annual excess spread decreased to approximately 11.66% from 12.58% (13.30% as priced). Prefunding has been eliminated in this transaction. The collateral composition changes from the series transaction include the following: The percentage of Chapter 7 and Chapter 13 bankruptcy collateral decreased to 47.3% from 50.7%. 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 7.5% from 8.7%. The average original amount financed decreased to $17,883 from $18,900. The weighted average loan-to-value (LTV) increased to approximately 132.7% from 131.4%. The percentage of new vehicles decreased to approximately 7.1% from 8.1%. 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. An initial 4.50% overcollateralization amount that will build to a target of 13.15% of the current pool balance by applying excess spread, subject to a floor of 2.00% of the initial pool balance. A reserve account that will be funded with an initial deposit of 1.00% of the initial pool balance. The reserve account MARCH 11,

7 will be nondeclining throughout the transaction's life. 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 occurs and continues, 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. The indenture trustee may accelerate the notes, and shall do so if so directed in writing by a majority of the MARCH 11,

8 outstanding amount of the controlling note class. The trust estate may also be liquidated, but only if a credit event of default occurs, if a majority of the outstanding amount of the controlling note class consent, 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 payment priority shown in 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 two senior-sub transactions, the series and series 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). MARCH 11,

9 The series pool experienced the highest cumulative net losses due, in our view, not only due to the effects of the recession, but also to the pool's low percentage of bankruptcy collateral (13.1%) compared with the other paid-off pools. Chart 2 Prestige currently has four outstanding securitizations: series , , , and The series transaction, after 47 months of performance, has 9.42% of cumulative net losses and a pool factor of approximately 11.3%. The series transaction, after 34 months of performance, has 9.70% of cumulative net losses and a pool factor of approximately 28.4%. The series transaction, after 23 months of performance, has 7.13% of cumulative net losses and a pool factor of approximately 48.5%. The series transaction, after 11 months of performance, has 2.36% of cumulative net losses and a pool factor of approximately 76.7%. We are currently projecting that the series transaction will lose approximately 9.25%-9.75%, while the series , , and pools will lose approximately 11.25%-11.75% (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. MARCH 11,

10 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 March 12, N/A (i)standard & Poor's 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. Series , , and 's lifetime cumulative net loss expectations have been revised higher than initially projected. Although loss expectations are higher, the credit enhancement for each transaction, as a percentage of the outstanding pool, has grown since closing. On Feb. 3, 2014, we raised our ratings on five classes from PART series and and affirmed the our ratings on the remaining seven classes from PART series and (see "Various Rating Actions Taken On Three Prestige Auto Receivables Trust Transactions And Prestige Receivables Co. IV LLC," published Feb. 3, 2014). We will continue to monitor these transactions' performance to determine if the assigned ratings remain sufficient and take any rating actions we deem appropriate. The series pool's cumulative net losses are currently tracking higher than the series pool (see chart 3), with approximately six months less seasoning at closing than the latter. The series pool's cumulative net losses are currently tracking a little higher than the series pool and much higher than the series pool, albeit with about the same initial seasoning as the series pool and approximately five months less seasoning than the series pool. The series pool's cumulative net losses are currently tracking in line with those of the series pool (see chart 3). We believe that the higher losses are due not only to increased competition and credit normalization but also to 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 expansion areas. It therefore attempted to prepare for this by adjusting its scorecard for those areas as it entered them in addition to a general scorecard tightening in the spring of When losses from those areas came in even higher than expected, in spring 2014 the company again tightened its scorecard in all states, 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. In addition, given the currently evolving regulatory environment, as of mid-2014 the company, along with others in the industry, began modifying its collection efforts by, for example, lengthening the number of days an account can be past due before it initiates contact with various parties other than the obligor. MARCH 11,

11 Chart 3 Managed Portfolio As of Dec. 31, 2015, Prestige's serviced portfolio was approximately $940.7 million, a 9% increase since Dec. 31, Total delinquencies increased to 4.6% of the outstanding loan balance as of Dec. 31, 2015, from 4.3% as of Dec. 31, Annualized net losses as a percentage of the average amount outstanding increased to 4.4% as of Dec. 31, 2015, from 3.3% as of Dec. 31, 2014 (see table 4). 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 delinquency and net loss performance to worsen modestly on a year-over-year basis commensurate with portfolio growth and credit normalization. Table 4 Managed Portfolio As of Dec. 31 Delinquency experience Portfolio at end of period (mil. $) MARCH 11,

12 Table 4 Managed Portfolio (cont.) 30-plus-day delinquencies as a % of the portfolio(i) For the period ended Dec Loan loss experience Avg. month-end amount outstanding during the period (mil. $) Net charge-offs as a % of the avg. month-end amount outstanding Managed portfolio 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 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 in table 5. Table 5 Origination Static Pool Observations Q1-Q Q1-Q Q1-Q Q1-Q Q1-Q Bankruptcy program Projected loss range Weighted average Non-bankruptcy program Projected loss range Weighted average MARCH 11,

13 Chart 4 MARCH 11,

14 Chart 5 MARCH 11,

15 Chart 6 MARCH 11,

16 Chart 7 Pool Analysis As of the Feb. 29, 2016, cutoff date, the collateral pool consisted of approximately $326.8 million in auto loans. The pool consists of current production loans originated almost entirely in 2015 (see table 6). Table 6 Collateral Comparison Prestige Auto Receivables Trust Receivables balance (mil. $) No. of receivables 18,736 24,537 23,461 20,093 17,100 Avg. original loan balance ($) 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.) MARCH 11,

17 Table 6 Collateral Comparison (cont.) Original term greater than 60 mos. (%) Weighted avg. LTV (%) % of new vehicles % of used vehicles Bankruptcy receivables (%) Vehicle type breakout (%) Car SUV Van/truck Top three state concentrations (%) IL=10.3 IL=10.5 TX=12.0 TX=11.8 AZ=15.6 TX=7.8 TX=10.4 IL=9.3 IL=10.8 TX=15.0 OH=7.2 OH=8.3 OH=7.2 AZ=9.6 IL=9.4 Cumulative net loss on paid off pools (%) N/A N/A N/A N/A N/A Projected losses on outstanding pools (%) N/A N/A N/A N/A PTI--Payment to income. APR--Annual percentage rate. LTV--Loan-to-value. N/A--Not applicable. Standard & Poor's Expected Loss: 12.25%-12.75% 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. Although the series pool has one of the highest percentages of bankruptcy collateral among the securitized pools, which we regard as a positive, we have also observed higher losses in the bankruptcy origination net loss static pools. In addition, it has less new collateral and less seasoning than its predecessors as well as the highest weighted average LTV. 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 12.25%-12.75% range. MARCH 11,

18 Cash Flow Modeling We modeled the transaction to simulate rated stress scenarios appropriate for the assigned preliminary ratings (see table 7). Table 7 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 (%) 12/24/36/48 12/24/36/48 12/24/36/48/60 12/24/36/48/60 12/24/36/48/60 39/84/100 35/75/90/100 35/75/90/100 35/75/90/100 35/75/90/ Recoveries (%) Recovery lag (mos.) Servicing fee (%) Weighted avg. APR drift (bps) Approximate break-even levels (%)(i) (5) (5) (5) (5) (5) (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 negative five basis points 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 that is 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 8 and chart 8). Table 8 Scenario Analysis Summary Stress multiple (x) 1.75 Loss level (%) MARCH 11,

19 Table 8 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) (5) 25/60/91/100 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 2.42x at month one, builds to 2.94x by month 12, and continues to grow thereafter 2.06x at month one, builds to 2.47x by month 12, and continues to grow thereafter 1.53x at month one, builds to 1.77x by month 12, and continues to grow thereafter 1.18x at month one, builds to 1.29x by month 12, and continues to grow thereafter 1.01x at month one, builds to 1.07x by month 12 and 1.08x by month 13, before declining to 1.04x by month 18 where it remains through month 21, before continuing to grow thereafter ABS--Absolute prepayment speed. APR--Annual percentage rate. Bps--Basis points. Chart 8 MARCH 11,

20 Sensitivity analysis: 21.88% cumulative net loss results Under the 21.88% stressed loss scenario, which is approximately 1.75x our expected loss level, the transaction reaches the 13.15% overcollateralization target in month 14 and remains at the target level through month 22. The overcollateralization floor level is reached around months 33-34, although it dips below it from month 33 on and never returns to its floor level. The overcollateralization is exhausted by month 45. During the months when the transaction is at the overcollateralization target, it releases excess cash flow. The reserve account is drawn from months and 65-68, with deposits made to the reserve account 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 five, 19, 28, 33, 44, 57, and 68 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 (see table 6). 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 (April 17, 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 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), 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 MARCH 11,

21 Mrs. Karen G. Miller, widow of the late Mr. Larry H. Miller, owns, controls, or operates individually and as sole trustee of a certain trust. In addition to Prestige, the Miller Group includes more than 50 automobile dealerships in the western U.S., the National Basketball Assn.'s Utah Jazz, the Vivint Smart Home Arena, KJZZ Television Station, Jordan Commons (a 359,000-sq.-ft. office and entertainment complex), more than a dozen large movie theater complexes (including one within Jordan Commons), 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), 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, an estimated $5.3 billion in total revenues, and employs 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 Methodology And Assumptions For Ratings Above The Sovereign--Single-Jurisdiction Structured Finance, May 29, 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 Understanding Standard & Poor's Rating Definitions, June 3, 2009 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 Related Research Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 Various Rating Actions Taken On Three Prestige Auto Receivables Trust Transactions And Prestige Receivables Co. IV LLC, Feb. 3, 2014 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 MARCH 11,

22 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 Joseph Wang for their analytical contributions to this presale report. MARCH 11,

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