Morningstar DBRS Takes Credit Rating Actions on United Auto Credit Securitization Trust 2022-2

DBRS, Inc. (Morningstar DBRS) upgraded one credit rating, confirmed two credit ratings, and downgraded one credit rating from United Auto Credit Securitization Trust 2022-2 as follows:

United Auto Credit Securitization Trust 2022-2:
-- Class B Notes confirmed at AAA (sf)
-- Class C Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes downgraded to B (sf) from 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 March 2024 payment date, United Auto Credit Securitization Trust 2022-2 has amortized to a pool factor of 40.91%, and has current cumulative net losses (CNLs) to date of 23.02%. 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 to 29.50%. As a result, the current level of hard credit enhancement (CE) and estimated excess spread are insufficient to support the current credit rating on the Class E Notes and, consequently, the credit rating has been downgraded to a rating level commensurate with the current implied multiple.

-- Current CE has increased for all of the outstanding notes, except for the Class E Notes, where the current CE has declined to 6.03% compared with the initial 12.00%.

-- As of the March 2024 payment date, the current overcollateralization amount is 2.36% relative to the target of 15.50% of the outstanding receivables balance. Additionally, the transaction structure includes a fully funded non-declining reserve account (RA) of 1.50% of the initial aggregate pool balance. As the transaction amortizes, the RA percentage will increase as it will represent a larger portion of available CE.

-- While CNL is tracking well above initial expectation, the Class B Notes, Class C Notes, and Class D Notes 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.

-- 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 at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

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

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.
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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 (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.