DBRS Morningstar Takes Rating Actions on Two Series Issued by OnDeck Asset Securitization Trust II

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the following classes from the OnDeck Asset Securitization Trust II LLC, Series 2018-1 and 2019-1 transactions:

-- Series 2018-1 Asset Backed Notes, Class B at A (sf)
-- Series 2019-1 Fixed Rate Asset Backed Notes, Class B at AA (sf)
-- Series 2019-1 Fixed Rate Asset Backed Notes, Class C at A (sf)

DBRS Morningstar also confirmed its ratings on the following classes and removed them from Under Review with Negative Implications, where they were originally placed on April 20, 2020 and maintained on September 2, 2020:

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

DBRS Morningstar also discontinued its ratings on the following classes due to repayment:

-- Series 2018-1 Asset Backed Notes, Class A
-- Series 2019-1 Fixed Rate Asset Backed Notes, Class A

The rating actions are based on the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: September Update,” published on September 10, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on September 10, 2020, and are reflected in DBRS Morningstar’s rating analysis.

-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario remains predicated on a more rapid return of confidence and a steady recovery heading into 2021.

-- Significant amount of de-leveraging that has been achieved in these transactions between April 2020 and October 2020, as manifested in the higher breakeven cumulative gross default rate relative to the original cumulative gross default hurdle rate for each class of securities, as of the October 2020 payment date.

-- General success of On Deck Capital, Inc. in improving and sustaining collectability rate (vs. scheduled principal and interest payments due on the loans) for its portfolio and increasing its paying customer percentage from the low level in April 2020.

-- While a substantial portion of the collateral pool in these transactions continues to exhibit high missed payment factors, the percentage of current loans has been increasing steadily, and obligors for a material portion of delinquent and defaulted receivables continue to make partial or full payments.

-- Both Series 2018-1 and Series 2019-1 are currently in rapid amortization, thus, using all available funds to repay the noteholders.

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 methodologies are Rating and Monitoring Asset-Backed Commercial Paper: U.S. ABCP Conduits (February 5, 2020) and 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 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 not 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.

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

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