DBRS Morningstar Maintains Under Review with Negative Implications Status on Four Classes of Notes Issued by OnDeck Asset Securitization Trust II LLC, Series 2018-1 and Series 2019-1

DBRS, Inc. (DBRS Morningstar) maintained the Under Review with Negative Implications status on the following four classes of notes (the Notes) issued by OnDeck Asset Securitization Trust II LLC, Series 2018-1 and Series 2019-1:

-- Series 2018-1 Asset Backed Notes, Class C rated BBB (sf)
-- Series 2018-1 Asset Backed Notes, Class D rated BB (high) (sf)
-- Series 2019-1 Fixed Rate Asset Backed Notes, Class D rated BBB (sf)
-- Series 2019-1 Fixed Rate Asset Backed Notes, Class E rated BB (high) (sf)

DBRS Morningstar initially placed its ratings on the Notes Under Review with Negative Implications on April 20, 2020. Maintaining the Under Review status on the Notes considers DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: July Update,” published on July 22, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 2020, and are reflected in DBRS Morningstar’s analysis. The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020.

Because of widespread interruption in economic activity throughout the United States related to the coronavirus, the small business sector continues to face significant headwinds. Small businesses have been vulnerable to the coronavirus’ impacts, including sharply lower or nonexistent consumer foot traffic, supply-chain disruptions, and employee absences. The collateral pool in these transactions continues to exhibit high missed payment factors and both Series 2018-1 and Series 2019-1 are currently in rapid amortization.

DBRS Morningstar also notes:
(1) Significant principal repayment on the outstanding notes from April 2020 to July 2020, resulting in note factors of 41% and 52% for Series 2018-1 and Series 2019-1, respectively, as of the August 2020 remittance report date; and

(2) OnDeck Capital, Inc.’s general success in improving and sustaining the collectability rate for its portfolio and increasing its paying customer percentage from the low level in April 2020. Obligors for a material portion of delinquent and defaulted receivables continue to make partial or full payments.

When placing a rating Under Review with Negative Implications, DBRS Morningstar seeks to complete its assessment and remove the Under Review status on the rating as soon as appropriate. Upon the resolution of the Under Review status, DBRS Morningstar may confirm or downgrade the ratings on the affected classes.

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:
The principal methodology is DBRS Morningstar Master U.S. ABS Surveillance (May 27, 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.

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

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