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

DBRS, Inc. (Morningstar DBRS) confirmed eight credit ratings on two Arivo Acceptance Auto Loan Receivables Trust transactions as follows:

Arivo Acceptance Auto Loan Receivables Trust 2022-1:
-- Class A confirmed at AA (high) (sf)
-- Class B confirmed at A (high) (sf)
-- Class C confirmed at BBB (sf)
-- Class D confirmed at BB (sf)

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 confirmed at BBB (sf)
-- Class D 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.

--As of the February 2024 payment date, Arivo Acceptance Auto Loan Receivables Trust 2022-1 (Arivo 2022-1) and Arivo Acceptance Auto Loan Receivables Trust 2022-2 (Arivo 2022-2) have amortized to pool factors of 50.04% and 68.64%, respectively, and have current CNLs to date of 10.12% and 9.91%, respectively. Current CNLs are tracking above Morningstar DBRS’ initial base case loss expectations of 9.40% and 9.10%, respectively.

--Due to weaker-than-expected performance, Morningstar DBRS has revised the base case loss expectation for Arivo 2022-1 and Arivo 2022-2 to 16.50% and 16.75%, respectively.

--As of the February 2024 payment date, Arivo 2022-1 has a current Overcollateralization (OC) amount of 9.24% relative to the target of 13.70% of the outstanding receivables balance. Arivo 2022-2 has a current OC amount of 3.80% relative to the target of 12.00% of the outstanding receivables balance.

--The transactions were initially 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 2022-1 and Arivo 2022-2, respectively. As both transactions amortize, the CCA percentages have increased as they represent a larger portion of available CE.

--For Arivo 2022-2, the Indenture was amended on February 14, 2024 to modify the definition of “Required Cash Collateral Account Balance” to mean an amount equal to 2.37% multiplied by the sum of (i) the aggregate Receivable Balance of the Initial Receivables as of the Initial Cut-Off Date and (ii) the aggregate Receivable Balance of all Subsequent Receivables as of the related Subsequent Cut-Off Date. As of the February 15, 2024 distribution date, the CCA is fully funded and equal to $6,349,991.89, reflecting an increase of $3,000,000.

--On December 22, 2023, Morningstar DBRS placed the current credit ratings on the Class C and Class D Notes in Arivo 2022-1 and on the Class C and Class D Notes in Arivo 2022-2 Under Review with Negative Implications (UR-Neg.).

--Morningstar DBRS has concluded its review and determined that the current level of hard CE (inclusive of the addition to the CCA for Arivo 2022-2) and the estimated excess spread, are sufficient to support the current credit ratings on the Class C and Class D Notes in Arivo 2022-1 and on the Class C and Class D Notes in Arivo 2022-2. Consequently, the aforementioned credit ratings have been confirmed and the UR-Neg. status has been removed.

--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 Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at https://dbrs.morningstar.com/research/427030.

Notes:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (22 February 2024) https://dbrs.morningstar.com/research/428506/morningstar-dbrs-master-u.s.-abs-surveillance.

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

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

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

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

-- Operational Risk Assessment for U.S. ABS Servicers (February 22, 2024),
https://dbrs.morningstar.com/research/428505

-- Operational Risk Assessment for U.S. ABS Originators (February 22, 2024),
https://dbrs.morningstar.com/research/428504

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

-- Rating U.S. Structured Finance Transactions (February 22, 2024),
https://dbrs.morningstar.com/research/428503

-- 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 info-DBRS@morningstar.com.