Morningstar DBRS Assigns Provisional Ratings to Prestige Auto Receivables Trust 2024-1

DBRS, Inc. (Morningstar DBRS) assigned provisional ratings to the classes of notes to be issued by Prestige Auto Receivables Trust 2024-1 (PART 2024-1 or the Issuer):

--$34,000,000 Class A-1 Notes at R-1 (high) (sf)
--$66,640,000 Class A-2 Notes at AAA (sf)
--$34,420,000 Class B Notes at AA (sf)
--$32,040,000 Class C Notes at A (sf)
--$30,860,000 Class D Notes at BBB (sf)
--$26,350,000 at Class E Notes at BB (sf)

CREDIT RATING RATIONALE/DESCRIPTION

The provisional credit ratings are based on Morningstar DBRS’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 Morningstar DBRS-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.
-- Morningstar DBRS 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 Morningstar DBRS broken down by credit grade, 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 Morningstar DBRS rating category loss multiples for each rating assigned are within the published criteria.

(4) The Morningstar DBRS CNL assumption is 19.15% based on the expected cutoff date pool composition.
-- The transaction assumptions consider Morningstar DBRS’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 Morningstar DBRS’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 Morningstar DBRS “Legal Criteria for U.S. Structured Finance.”

The ratings on the Class A-1 and Class A-2 Notes reflect 58.60% of initial hard credit enhancement provided by subordinated notes in the pool (52.10%), the reserve account (1.00%), and OC (5.50%). The ratings on the Class B, Class C, Class D, and Class E Notes reflect 44.10%, 30.60%, 17.60%, and 6.50% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

Morningstar DBRS’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.

Morningstar DBRS’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.

Morningstar DBRS’s long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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 Morningstar DBRS 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 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; https://dbrs.morningstar.com/research/427030).

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 Morningstar DBRS Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. Morningstar DBRS 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.

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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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.

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

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

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

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

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.