DBRS Morningstar Finalizes Its Provisional Ratings on CIG Auto Receivables Trust 2021-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) issued by CIG Auto Receivables Trust 2021-1 (CIGAR 2021-1):

-- $105,810,000 Class A Notes rated AAA (sf)
-- $16,280,000 Class B Notes rated AA (high) (sf)
-- $8,140,000 Class C Notes rated AA (low) (sf)
-- $23,990,000 Class D Notes rated BBB (sf)
-- $11,140,000 Class E Notes rated BB (sf)

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

-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is provided in the form of subordination, OC, a fully funded reserve fund, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar expected loss assumptions under various stress scenarios for the assigned ratings.
-- 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 rating addresses the timely payment of interest on a monthly basis and payment of principal by the legal final maturity date.
-- The CIG senior management team has considerable experience and a successful track record within the auto finance industry, having managed the company through multiple economic cycles.
-- The capabilities of CIG Financial, LLC (CIG) with regard to originations, underwriting, and servicing.
-- The quality and consistency of provided historical static pool data for CIG originations and performance of the CIG auto loan portfolio.
-- DBRS Morningstar's projected losses include the assessment of the impact of the Coronavirus Disease (COVID-19) pandemic. While considerable uncertainty remains with respect to the intensity and duration of the shock, DBRS Morningstar-projected CNL includes an assessment of the expected impact on consumer behavior. The DBRS Morningstar CNL assumption is 11.55% based on the expected cut-off date pool composition.
-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns,” published on September 8, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that, although COVID-19 remains a risk to the outlook, uncertainty around the macroeconomic effects of the pandemic has gradually receded. Current median forecasts considered in the baseline macroeconomic scenarios incorporate some risks associated with further outbreaks, but remain fairly positive on recovery prospects given expectations of continued fiscal and monetary policy support. The policy response to COVID-19 may nonetheless bring other risks to the forefront in the coming months and years.
-- 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 CIG, that the trust has a valid first-priority security interest in the assets, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

The CIGAR 2021-1 transaction represents the fourth public term securitization of subprime auto loans and offers both senior and subordinate rated securities.

The rating on the Class A Note reflects the 39.25% of initial hard credit enhancement provided by the subordinated notes in the pool (34.75%), the Reserve Account (1.00%), and overcollateralization (3.50%). The ratings on the Class B, C, D, and E Notes reflect 29.75%, 25.00%, 11.00%, and 4.50% 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating U.S. Retail Auto Loan Securitizations (May 10, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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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