DBRS Morningstar Assigns Provisional Ratings to Prestige Auto Receivables Trust 2023-2

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the classes of notes to be issued by Prestige Auto Receivables Trust 2023-2 (PART 2023-2 or the Issuer):

--$33,000,000 Class A-1 Notes at R-1 (high) (sf)
--$80,770,000 Class A-2 Notes at AAA (sf)
--$38,950,000 Class B Notes at AA (sf)
--$30,490,000 Class C Notes at A (sf)
--$32,240,000 Class D Notes at BBB (sf)
--$31,170,000 at Class E Notes at BB (sf)

CREDIT RATING RATIONALE/DESCRIPTION

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 subordination, overcollateralization (OC), amounts held in the reserve account, and excess spread. Credit enhancement levels are sufficient to support DBRS Morningstar-projected expected cumulative net loss (CNL) assumptions 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) The transaction parties’ capabilities with regard to originations, underwriting, and servicing.
-- DBRS Morningstar has performed an operational review of Prestige and considers the entity to be an acceptable originator and servicer of subprime auto receivables. Additionally, the transaction has an acceptable backup servicer.
-- The Company’s management team has extensive experience. The Company has been lending to the subprime auto sector since 1994 and has considerable experience lending to Chapter 7 and 13 obligors.

(3) The credit quality of the collateral and performance of Prestige’s auto loan portfolio.
-- Prestige shared vintage CNL data with DBRS Morningstar broken down by credit tier, payment-to-income ratio, and other buckets.
-- The Company continues to evaluate and adjust its underwriting standards as necessary to target and maintain the credit quality of its loan portfolio.
-- The DBRS Morningstar rating category loss multiples for each rating assigned are within the published criteria.

(4) The DBRS Morningstar CNL assumption is 16.10% based on the expected cutoff 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: September 2023 Update,” published on September 28, 2023. 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 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 Prestige, 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 ratings on the Class A-1 and Class A-2 Notes reflect 58.65% of initial hard credit enhancement provided by subordinated notes in the pool (49.45%), the reserve account (1.00%), and OC (8.20%). The ratings on the Class B, Class C, Class D, and Class E Notes reflect 44.15%, 32.80%, 20.80%, and 9.20% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

DBRS Morningstar’s credit rating on the securities referenced herein addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Note Interest and the related Note Balance.

DBRS Morningstar’s credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. The associated contractual payment obligations that are not financial obligations are the related interest on unpaid Overdue Interest for each of the rated notes.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The DBRS Morningstar short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 (July 4, 2023; https://www.dbrsmorningstar.com/research/416784/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 applicable to the credit rating is Rating U.S. Retail Auto Loan Securitizations (May 9, 2023; https://www.dbrsmorningstar.com/research/413731)

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 credit rating process for this credit 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 credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277]

The credit 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 (September 25, 2023) https://www.dbrsmorningstar.com/research/421053/rating-us-structured-finance-transactions

Operational Risk Assessment for U.S. ABS Servicers (July 20, 2023) https://www.dbrsmorningstar.com/research/417415/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (July 20, 2023) https://www.dbrsmorningstar.com/research/417416/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

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/410863.

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