DBRS Morningstar Finalizes Provisional Ratings on GTE Auto Receivables Trust 2019-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes issued by GTE Auto Receivables Trust 2019-1 (GART 2019-1):

-- $36,312,000 Class A MM Notes at R-1 (high) (sf)
-- $58,188,000 Class A-2 Notes at AAA (sf)
-- $52,937,000 Class A-3 Notes at AAA (sf)
-- $22,313,000 Class B Notes at A (sf)
-- $5,250,000 Class C Notes at BBB (sf)

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

-- The GART 2019-1 transaction is the first securitization sponsored by GTE Federal Credit Union (GTE Financial or the Company) and the first securitization sponsored by a credit union (CU). GTE Financial has contacted its National Credit Union Administration (NCUA) regional office and the NCUA’s Office of the General Counsel regarding its proposed securitization of automobile loans. GTE Financial received written confirmation from the NCUA prior to the securitization and the issuance and sale of the related asset-backed securities; its formation and ownership of a newly created bankruptcy-remote, special-purpose entity as a depositor; and its retention of certain related asset-backed securities, which are incidental powers of a federal CU under the Federal Credit Union Act.

-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
(1) Credit enhancement is in the form of subordination, overcollateralization, a fully funded reserve account and excess spread. Credit enhancement levels are sufficient to support DBRS Morningstar-projected expected cumulative net loss (CNL) assumptions under various stress scenarios.
(2) DBRS Morningstar analyzed the performance of GTE Financial’s auto loan and retail installment contract originations and vintage losses to determine a projected CNL expectation for the GART 2019-1 pool.
(3) 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 payment of principal by the scheduled final payment dates.

-- The Company’s history as an originator in the retail auto loan business within the middle-west Florida region as well as its capabilities to conform to its policies and procedures with respect to underwriting and servicing.
(1) DBRS Morningstar has performed an operational review of GTE Financial and considers the entity to be an acceptable originator and servicer of prime and near-prime automobile loans. In addition, U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS Morningstar) is the backup servicer.
(2) Company management has considerable experience, with over 20 years on average of experience in the consumer-lending business.

-- Since 2012, GTE Financial has been able to steadily increase membership, reaching over 235,000 members in 2019. As of June 30, 2019, total assets were $2.12 billion, of which the auto loan portfolio comprises 37%. The Company originates loans both on a direct basis to members through in-branch, Internet and telephonic applications and on an indirect basis through a network of franchised and independent motor vehicle dealerships.

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 & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 [email protected].

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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