DBRS Morningstar Assigns Provisional Ratings to OneMain Direct Auto Receivables Trust 2022-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of notes to be issued by OneMain Direct Auto Receivables Trust 2022-1 (ODART 2022-1 or the Issuer):

-- $183,550,000 Class A-1 Notes at AAA (sf)
-- $183,550,000 Class A-2 Notes at AAA (sf)
-- $62,370,000 Class B Notes at AAA (sf)
-- $42,100,000 Class C Notes at AA (sf)
-- $28,430,000 Class D Notes at A (sf)

The provisional ratings are based on DBRS Morningstar’s review of the following analytical considerations:
-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns March 2022 Update,” published on March 24, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020. Despite several new or increasing risks, including the Russian invasion of Ukraine, rising inflation, and new coronavirus variants, the overall outlook for growth and employment in the United States remains relatively positive.
--DBRS Morningstar's projected losses do not include any additional stress from the coronavirus impact; the DBRS Morningstar CNL assumption is 3.60% based on the worst-case loss pool constructed, giving consideration to the concentration limits present in the structure.
-- The Class A for the new structure will be split between a fixed rate A-1 tranche and a floating rate A-2 tranche. The Class A-2 floating rate will be benchmarked to the Secured Overnight Financing Rate (SOFR). The interest rate on the Class A-2 shall be not less than 0% because the sum of the SOFR Rate plus the applicable margin could be less than 0%. The Class A-2 tranche will be a maximum of 50% of the total Class A Notes.
-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- The ODART 2022-1 multiple assumptions for the Class A, Class B, Class C, and Class D Notes are at the higher end of the DBRS Morningstar range set forth in the criteria for this asset class. DBRS Morningstar believes that the higher multiples are warranted given the magnitude of expected loss and structural features of the transaction.
-- There will be no backup servicer for the ODART 2022-1 transaction; however HSBC Bank USA, National Association will serve as the Indenture Trustee.
-- The transaction parties’ capabilities with regard to originations, underwriting, and servicing.
-- The quality and consistency of provided historical static pool data for OneMain Finance Corporation originations and performance of the OneMain Direct Auto loan portfolio.
-- The legal structure and presence of legal opinions that will address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with OneMain, that the trust has a valid first-priority security interest in the assets, and consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”
-- The provisional rating on the Class A Notes reflects the 30.75% of initial hard credit enhancement provided by the subordinated notes in the pool, the Reserve Account (0.50%), and overcollateralization (5.00%). The ratings on the Class B, Class C, and Class D Notes reflect 18.90%, 10.90%, and 5.50%, respectively, of initial hard credit enhancement. Additional credit support may be provided from excess spread available in the structure.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

The principal methodology is Rating U.S. Retail Auto Loan Securitizations (May 10, 2022), 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.

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.

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

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