DBRS Morningstar Assigns Provisional Ratings to DT Auto Owner Trust 2023-2

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of notes (the Notes) to be issued by DT Auto Owner Trust 2023-2 (the Issuer or DTAOT 2023-2):

-- $240,440,000 Class A Notes at AAA (sf)
-- $51,240,000 Class B Notes at AA (sf)
-- $56,890,000 Class C Notes at A (sf)
-- $77,490,000 Class D Notes at BBB (sf)
-- $23,940,000 Class E Notes at BB (sf)

The provisional 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, subordination, amounts held in the 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.
-- 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.

(2) DTAOT 2023-2 provides for the Notes’ coverage multiples that are slightly below the DBRS Morningstar range of multiples set forth in the criteria for this asset class. DBRS Morningstar believes that this is warranted, given the magnitude of expected loss, company history, and structural features of the transaction.

(3) The DBRS Morningstar CNL assumption is 24.55% based on the expected pool composition.

(4) 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.

(5) The transaction parties’ capabilities with regard to originations, underwriting, and servicing.

(6) The quality and consistency of historical static pool data for DriveTime originations and performance of the DriveTime auto loan portfolio.

(7) 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 DriveTime, 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 transaction represents a securitization of a portfolio of motor vehicle retail installment sales contracts originated by DriveTime Car Sales Company, LLC (the Originator). The Originator is a direct, wholly owned subsidiary of DriveTime, a leading used-vehicle retailer in the United States that focuses primarily on the sale and financing of vehicles to the subprime market.

The rating on the Class A Notes reflects 54.80% of initial hard credit enhancement provided by the subordinated Notes in the pool, the reserve account (1.50%), and overcollateralization (12.60%). The ratings on the Class B, C, D, and E Notes reflect 44.85%, 33.80%, 18.75%, and 14.10% 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 U.S. dollars unless otherwise noted.

The principal methodology applicable to the ratings 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.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

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 (April 5, 2023) https://www.dbrsmorningstar.com/research/412303/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (April 5, 2023) https://www.dbrsmorningstar.com/research/412302/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].