DBRS Morningstar Finalizes Provisional Ratings on GLS Auto Receivables Issuer Trust 2023-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes issued by GLS Auto Receivables Issuer Trust 2023-1 (the Issuer):

-- $50,900,000 Class A-1 Notes at R-1 (high) (sf)
-- $97,890,000 Class A-2 Notes at AAA (sf)
-- $44,730,000 Class B Notes at AA (sf)
-- $42,770,000 Class C Notes at A (sf)
-- $42,430,000 Class D Notes at BBB (low) (sf)
-- $26,700,000 Class E Notes at BB (sf)

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

(1) Transaction capital structure, ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization (OC), subordination, amounts held in the reserve account, 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 DBRS Morningstar CNL assumption is 16.65%, based on the expected Cut-Off Date pool composition.

(3) The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns: December 2022 Update, published on December 21, 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 consistent operational history of Global Lending Services LLC (GLS or the Company) and the strength of the overall Company and its management team.
-- The GLS senior management team has considerable experience and a successful track record within the auto finance industry.

(5) The capabilities of GLS with regard to originations, underwriting, and servicing.
-- DBRS Morningstar performed an operational review of GLS and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer.

(6) DBRS Morningstar exclusively used the static pool approach because GLS has enough data to generate a sufficient amount of static pool projected losses.
-- DBRS Morningstar was conservative in the loss forecast analysis performed on the static pool data.

(7) 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 GLS, 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.”

GLS is an independent full-service automotive financing and servicing company that provides (1) financing to borrowers who do not typically have access to prime credit-lending terms for the purchase of late-model vehicles and (2) refinancing of existing automotive financing.

The rating on the Class A-1 and Class A-2 Notes reflects 55.60% of initial hard credit enhancement provided by subordinated notes in the pool (47.80%), the reserve account (1.00%), and OC (6.80%). The ratings on the Class B, Class C, Class D, and Class E Notes reflect 41.95%, 28.90%, 15.95%, and 7.80% of initial hard credit enhancement, respectively. 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 (May 17, 2022).

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

The principal methodology applicable to the rating is Rating U.S. Retail Auto Loan Securitizations (May 10, 2022; https://www.dbrsmorningstar.com/research/396623).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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.

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].

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

Rating U.S. Structured Finance Transactions (February 6, 2023) https://www.dbrsmorningstar.com/research/409449/rating-us-structured-finance-transactions

Operational Risk Assessment for U.S. ABS Servicers (February 6, 2023)
https://www.dbrsmorningstar.com/research/409447/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (November 8, 2022)
https://www.dbrsmorningstar.com/research/405082/operational-risk-assessment-for-us-abs-originators

Legal Criteria for U.S. Structured Finance (December 7, 2022) https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance.

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