DBRS Morningstar Takes Credit Rating Actions on Four Arivo Acceptance Auto Loan Receivables Trust Transactions

DBRS, Inc. (DBRS Morningstar) upgraded three credit ratings, confirmed seven credit ratings, and placed four credit ratings Under Review with Negative Implications from four Arivo Acceptance Auto Loan Receivables Trust transactions as follows:

Arivo Acceptance Auto Loan Receivables Trust 2019-1:
-- Class B confirmed at AAA (sf)
-- Class C upgraded to AAA (sf) from AA (sf)

Arivo Acceptance Auto Loan Receivables Trust 2021-1:
-- Class A confirmed at AAA (sf)
-- Class B upgraded to AAA (sf) from AA (sf)
-- Class C upgraded to A (sf) from BBB (sf)
-- Class D confirmed at BB (sf)

Arivo Acceptance Auto Loan Receivables Trust 2022-1:
-- Class A confirmed at AA (high) (sf)
-- Class B confirmed at A (high) (sf)
-- Class C rated BBB (sf), placed Under Review with Negative Implications
-- Class D rated BB (sf), placed Under Review with Negative Implications

Arivo Acceptance Auto Loan Receivables Trust 2022-2:
-- Class A Notes confirmed at AA (sf)
-- Class B Notes confirmed at A (sf)
-- Class C Notes rated BBB (sf), placed Under Review with Negative Implications
-- Class D Notes rated BB (sf), placed Under Review with Negative Implications

The credit rating actions are based on 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 - December 2023 Update, published on December 19, 2023. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

-- The collateral performance to date and DBRS Morningstar's assessment of future performance. As of the November 2023 payment date, Arivo Acceptance Auto Loan Receivables Trust 2022-1 and Arivo Acceptance Auto Loan Receivables Trust 2022-2 have amortized to pool factors of 55.21% and 74.71%, respectively, and have current cumulative net losses (CNLs) to date of 8.62% and 7.79%, respectively. Current CNLs are tracking well above DBRS Morningstar’s initial base-case loss expectations of 9.40% and 9.10%, respectively. While credit enhancement (CE) has increased for all outstanding notes in Arivo Acceptance Auto Loan Receivables Trust 2022-1, the CE growth in Arivo Acceptance Auto Loan Receivables Trust 2022-2’s Class A Notes, Class B Notes, and Class C Notes has been minimal and CE has declined for the Class D Notes.

-- Because of weaker-than-expected performance, DBRS Morningstar has revised the base-case loss expectation for Arivo Acceptance Auto Loan Receivables Trust 2022-1 and Arivo Acceptance Auto Loan Receivables Trust 2022-2 to 16.50% and 16.75%, respectively. As a result, the current level of hard CE and estimated excess spread may be insufficient to support the current credit ratings on the Class C Notes and the Class D Notes from Arivo Acceptance Auto Loan Receivables Trust 2022-1 and Arivo Acceptance Auto Loan Receivables Trust 2022-2. Consequently, DBRS Morningstar has placed the current credit ratings on the aforementioned classes Under Review with Negative Implications. While CNLs are tracking well above initial expectations, the Class A Notes and the Class B Notes for the aforementioned transactions have benefited from deleveraging and have sufficient CE commensurate with the current credit ratings, and DBRS Morningstar has confirmed the credit ratings on these classes.

-- As of the November 2023 payment date, Arivo Acceptance Auto Loan Receivables Trust 2022-1 has a current overcollateralization (OC) amount of 9.26% relative to the target of 13.70% of the outstanding receivables balance. Arivo Acceptance Auto Loan Receivables Trust 2022-2 has a current OC amount of 5.07% relative to the target of 12.00% of the outstanding receivables balance. Additionally, both transactions are structured to include a fully funded non-declining cash collateral account (CCA) of 1.00% and 1.25% of the initial aggregate pool balance of Arivo Acceptance Auto Loan Receivables Trust 2022-1 and Arivo Acceptance Auto Loan Receivables Trust 2022-2, respectively. As both transactions amortize, the CCA percentage will increase as it will represent a larger portion of available CE.

-- The transaction parties’ capabilities with regard to originating, underwriting, and servicing.

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/416784 (July 4, 2023).

Notes:
The principal methodology applicable to the credit ratings is DBRS Morningstar Master U.S. ABS Surveillance (October 22, 2023), https://www.dbrsmorningstar.com/research/422279.

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 credit 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.
140 Broadway, 43rd Floor
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.

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

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

-- Legal Criteria for U.S. Structured Finance (December 7, 2023),
https://www.dbrsmorningstar.com/research/425081

-- Rating U.S. Structured Finance Transactions (October 30, 2023),
https://www.dbrsmorningstar.com/research/422592

-- Rating U.S. Retail Auto Loan Securitizations (May 9, 2023),
https://www.dbrsmorningstar.com/research/413731

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