DBRS Finalizes Provisional Ratings on Flagship Credit Auto Trust 2018-1

DBRS, Inc. (DBRS) finalized its provisional ratings on the following classes issued by Flagship Credit Auto Trust 2018-1 (the Issuer):

-- $122,750,000 Class A Notes at AAA (sf)
-- $22,500,000 Class B Notes at AA (sf)
-- $24,560,000 Class C Notes at A (sf)
-- $18,420,000 Class D Notes at BBB (sf)
-- $11,770,000 Class E Notes at BB (sf)

The ratings are based on a review by DBRS of the following analytical considerations:

-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of overcollateralization (OC), subordination, amounts held in the reserve fund and excess spread. Credit enhancement levels are sufficient to support the DBRS-projected cumulative net loss assumption under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and the payment of principal by the legal final maturity date.
-- The strength of the combined organization after the merger of Flagship Credit Acceptance LLC (Flagship) and CarFinance Capital LLC. DBRS believes the merger of the two companies provides synergies that make the combined company more financially stable and competitive.
-- The capabilities of Flagship with regard to originations, underwriting and servicing.
-- DBRS has performed an operational review of Flagship and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer.
-- The Flagship senior management team has considerable experience and a successful track record within the auto finance industry.
-- DBRS used a proxy analysis in its development of an expected loss.
-- A combination of company-provided performance data and industry-comparable data was used to determine an expected loss.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with Flagship, that the trust has a valid first-priority security interest in the assets and the consistency with the DBRS “Legal Criteria for U.S. Structured Finance.”

Flagship is an independent full-service automotive financing and servicing company that provides (1) financing to borrowers who do not typically have access to prime credit-lending terms for the purchase of late-model vehicles and (2) refinancing of existing automotive financing.

The rating on the Class A Notes reflects the 42.01% of initial hard credit enhancement provided by the subordinated notes in the pool (37.76%), the Reserve Account (2.00%) and OC (2.25%). The ratings on the Class B, Class C, Class D and Class E Notes reflect 31.01%, 19.01%, 10.00% and 4.25% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Retail Auto Loan Securitizations, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.