Morningstar DBRS Finalizes Provisional Ratings on Flagship Credit Auto Trust 2024-1

DBRS, Inc. (Morningstar DBRS) finalized its provisional ratings on the following classes of notes issued by Flagship Credit Auto Trust 2024-1 (FCAT 2024-1 or the Issuer):

-- $37,800,000 Class A-1 Notes at R-1 (high) (sf)
-- $145,000,000 Class A-2 Notes at AAA (sf)
-- $34,640,000 Class A-3 Notes at AAA (sf)
-- $37,620,000 Class B Notes at AA (sf)
-- $46,980,000 Class C Notes at A (sf)
-- $33,300,000 Class D Notes at BBB (sf)
-- $11,700,000 Class E Notes at BB (sf)

CREDIT RATING RATIONALE/DESCRIPTION
(1) Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of OC, subordination, amounts held in the reserve account, and excess spread. Credit enhancement levels are sufficient to support the Morningstar DBRS-projected cumulative net loss (CNL) assumption under various stress scenarios.

(2) The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and the payment of principal by the legal final maturity date.

(3) The credit quality of the collateral and performance of Flagship's auto loan portfolio.
-- The pool will include approximately 79% of indirect originations and 21% of direct originations.
-- The loans in the pool as of the statistical cut-off date will have a weighted-average FICO of 592 and a weighted-average annual percentage rate (APR) of 21.12%.

(4) The Morningstar DBRS CNL assumption is 13.25% based on the expected Cut-Off Date pool composition.

(5) The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns: March 2024 Update, published on March 27, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

(6) The capabilities of Flagship with regard to originations, underwriting (UW), and servicing.
-- Morningstar DBRS performed an operational review of Flagship and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer.

(7) The consistent operational history of Flagship and the strength of the overall Company and its management team.
-- The Flagship senior management team has considerable experience and a successful track record within the auto finance industry.
-- The quality and consistency of historical static pool data and performance of the auto loan portfolio.
-- Morningstar DBRS used the static pool approach to generate static pool projected losses.
-- Morningstar DBRS was conservative in the loss forecast analysis performed on the static pool data, and no seasoning credit was given to this collateral.

(8) The Company indicated that it may be subject to various consumer claims and litigation seeking damages and statutory penalties. Some litigation against Flagship could take the form of class-action complaints by consumers; however, the Company indicated that there is no material pending or threatened litigation.

(9) The legal structure and presence of legal opinions that are expected to address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with Flagship, that the trust has a valid first-priority security interest in the assets, and the consistency with Morningstar DBRS' Legal Criteria for U.S. Structured Finance.

Morningstar DBRS' 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 Accrued Note Interest and the related Note Balance.

Morningstar DBRS' 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. For example, the associated contractual payment obligation that is not a financial obligation is interest on unpaid interest for each of the rated notes.

Morningstar DBRS' 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.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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/morningstar-dbrs-criteria:-approach-to-environmental,-social,-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in US Dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating U.S. Retail Auto Loan Securitizations (May 9, 2023) https://dbrs.morningstar.com/research/413731/rating-u.s.-retail-auto-loan-securitizations.

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.
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 (March 21, 2024) 
https://dbrs.morningstar.com/research/430003/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (March 21, 2024) 
https://dbrs.morningstar.com/research/430004/operational-risk-assessment-for-us-abs-originators

Rating U.S. Structured Finance Transactions (April 15, 2024); 
https://dbrs.morningstar.com/research/431204/rating-us-structured-finance-transactions

Legal Criteria for U.S. Structured Finance (April 15, 2024) 
https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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