Morningstar DBRS Takes Credit Rating Actions on Four United Auto Credit Securitization Trust Transactions

DBRS, Inc. (Morningstar DBRS) upgraded six credit ratings, confirmed eight credit ratings, and placed one credit rating Under Review with Negative Implications from four United Auto Credit Securitization Trust transactions as follows:

United Auto Credit Securitization Trust 2021-1:
-- Class D Notes confirmed at AAA (sf)
-- Class E Notes upgraded to AAA (sf) from AA (low) (sf)
-- Class F Notes upgraded to BBB (high) (sf) from BBB (low) (sf)

United Auto Credit Securitization Trust 2022-1:
-- Class C Notes confirmed at AAA (sf)
-- Class D Notes upgraded to AAA (sf) from A (high) (sf)
-- Class E Notes confirmed at BB (high) (sf)

United Auto Credit Securitization Trust 2022-2:
-- Class B Notes confirmed at AAA (sf)
-- Class C Notes upgraded to AA (high) (sf) from A (high) (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes rated BB (sf), placed Under Review with Negative Implications

United Auto Credit Securitization Trust 2023-1:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (sf)
-- Class C Notes upgraded to AA (sf) from A (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)

The credit rating actions are based on the following analytical considerations:

-- The transaction assumptions consider Morningstar DBRS’ 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 Morningstar DBRS’ moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

-- The collateral performance to date and Morningstar DBRS' assessment of future performance.

-- As of the December 2023 payment date, United Auto Credit Securitization Trust 2022-2 has amortized to a pool factor of 47.99% and has current cumulative net losses (CNLs) of 19.78%. Current CNL is tracking well above Morningstar DBRS’ initial base-case loss expectations of 19.90%.

-- Because of weaker-than-expected performance, Morningstar DBRS has revised the base-case loss expectation for United Auto Credit Securitization Trust 2022-2 to 27.50%. As a result, the current level of hard credit enhancement (CE) and estimated excess spread may be insufficient to support the current credit rating on the Class E Notes. Consequently, Morningstar DBRS has placed the current credit rating on the aforementioned class Under Review with Negative Implications. While CNL is tracking well above initial expectations, the Class A Notes, Class B Notes, Class C Notes, and Class D Notes for the aforementioned transaction have benefited from deleveraging and have sufficient CE commensurate with the current credit ratings, and Morningstar DBRS has either confirmed or upgraded the credit ratings on these classes.

-- Current CE has increased for all of the outstanding notes except for the Class E Notes in United Auto Credit Securitization Trust 2022-2, where the current CE has declined to 9.50% compared with the initial 12.00%.

-- As of the December 2023 payment date, United Auto Credit Securitization Trust 2022-2 has a current overcollateralization amount of 6.38% relative to the target of 15.50% of the outstanding receivables balance. Additionally, the transaction is structured to include a fully funded non-declining reserve account (RA) of 1.50% of the initial aggregate pool balance of United Auto Credit Securitization Trust 2022-2. As the transaction amortizes, the RA 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, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023) at https://dbrs.morningstar.com/research/416784/dbrs-morningstar-criteria:-approach-to-environmental,-social,-and-governance-risk-factors-in-credit-ratings.

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

Other methodologies referenced in this transaction are listed at the end of this press release.

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.

Morningstar DBRS 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://dbrs.morningstar.com/about/methodologies.

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

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

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

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

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

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at [email protected].