DBRS Morningstar Finalizes Provisional Ratings on Exeter Automobile Receivables Trust 2022-4

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes issued by Exeter Automobile Receivables Trust 2022-4 (EART 2022-4 or the Issuer):

-- $67,600,000 Class A-1 Notes at R-1 (high) (sf)
-- $110,000,000 Class A-2 Notes at AAA (sf)
-- $100,450,000 Class A-3 Notes at AAA (sf)
-- $85,600,000 Class B Notes at AA (sf)
-- $78,110,000 Class C Notes at A (sf)
-- $75,910,000 Class D Notes at BBB (sf)
-- $62,490,000 Class E Notes at BB (sf)

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

(1) Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization (OC), subordination, a fully funded 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.

(2) The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. For this transaction, the ratings address the payment of timely interest on a monthly basis and principal by the legal final maturity date.

(3) The DBRS Morningstar CNL assumption is 17.50% based on the 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: June 2022 Update, published on June 29, 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.

(4) The transaction parties’ capabilities with regard to originations, underwriting, and servicing.
-- DBRS Morningstar performed an operational review of Exeter and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer.
-- The Exeter senior management team has considerable experience and a successful track record within the auto finance industry.

(5) The credit quality of the collateral and performance of Exeter’s auto loan portfolio.
-- As of the Cut-off Date (July 17, 2022), the collateral has a weighted-average (WA) seasoning of approximately three months and contains Exeter originations from Q4 2015 through Q3 2022, with approximately 93.6% consisting of loans originated since the second quarter of 2022. The average remaining term of the collateral pool is approximately 69 months. The WA non-zero FICO score of the pool is 584.

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

The rating on the Class A Notes reflects 56.50% of initial hard credit enhancement provided by subordinated notes in the pool (48.35%), OC (7.15%), and the reserve account (1.00%). The ratings on the Class B, C, D, and E Notes reflect 42.80%, 30.30%, 18.15%, and 8.15% of initial hard credit enhancement, respectively.

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/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.

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

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