DBRS Morningstar Finalizes Provisional Ratings on DT Auto Owner Trust 2020-2

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) issued by DT Auto Owner Trust 2020-2 (the Issuer or DTAOT 2020-2):

-- $188,320,000 Class A Notes at AAA (sf)
-- $46,580,000 Class B Notes at AA (low) (sf)
-- $67,500,000 Class C Notes at A (low) (sf)
-- $26,770,000 Class D Notes at BBB (sf)
-- $32,630,000 Class E Notes at BB (sf)

The ratings are based on DBRS Morningstar’s review of the following analytical considerations:

(1) Transaction capital structure, ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is 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 Morningstar-projected cumulative net loss (CNL) assumption under various stress scenarios.
-- DBRS Morningstar’s projected CNL assumption includes an assessment of how collateral performance could deteriorate because of macroeconomic stresses related to the Coronavirus Disease (COVID-19) pandemic.
-- The transaction assumptions include an increase to the expected loss. This assessment was guided by DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the coronavirus, available in its “Global Macroeconomic Scenarios: June Update” commentary published on June 1, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on June 1, 2020, and the updated scenarios are reflected in DBRS Morningstar’s rating analysis.
-- DBRS Morningstar applied transaction stresses in consideration of its moderate scenario in addition to observed performance during the 2008–09 financial crisis and the possible impact of stimulus from the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). In the moderate scenario for the United States outlined in the commentary (which serves as the primary anchor for current ratings), DBRS Morningstar anticipates that containment of the coronavirus will begin during Q2 2020, resulting in a gradual relaxation of stay-at-home measures and nonessential business closures and allowing a gradual economic recovery to begin starting in Q3 2020.

(2) DTAOT 2020-2 provides for Class A, B, C, D, and E coverage multiples that are slightly below the DBRS Morningstar range of multiples set forth in the criteria for this asset class. DBRS Morningstar believes that this is warranted, given the magnitude of expected loss and structural features of the transaction.

(3) The transaction parties’ capabilities with regard to originations, underwriting, and servicing.

(4) The quality and consistency of the provided historical static pool data for DriveTime Automotive Group, Inc. (DriveTime) originations and the performance of the DriveTime auto loan portfolio.

(5) The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with DriveTime, that the trust has a valid first-priority security interest in the assets, and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

The transaction represents a securitization of a portfolio of motor vehicle retail installment sales contracts originated by DriveTime Car Sales Company, LLC (the Originator). The Originator is a direct, wholly owned subsidiary of DriveTime. DriveTime is a leading used-vehicle retailer in the United States that focuses primarily on the sale and financing of vehicles to the subprime market.

The rating on the Class A Notes reflects 60.15% of initial hard credit enhancement provided by the subordinated Notes in the pool, the reserve account (2.00%), and OC (19.60%). The ratings on the Class B, C, D, and E Notes reflect 49.80%, 34.80%, 28.85%, and 21.60% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is Rating U.S. Retail Auto Loan Securitizations (May 13, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:
https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.dbrsmorningstar.com or contact us at [email protected].

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