Morningstar DBRS Takes Credit Rating Action on Flagship Credit Auto Trust 2022-2

DBRS, Inc. (Morningstar DBRS) downgraded its credit rating on the Class E Notes issued by Flagship Credit Auto Trust 2022-2 to B (sf) from BB (sf).

The credit rating action is 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 - March 2024 Update, published on March 27, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

-- As of the May 2024 payment date, Flagship Credit Auto Trust 2022-2 has amortized to a pool factor of 48.05%, and has current cumulative net losses (CNLs) to date of 12.77%. Current CNL is tracking above Morningstar DBRS' initial base-case loss expectation of 10.60%.

-- Because of the weaker-than-expected performance, Morningstar DBRS has revised the base-case loss expectation to 19.00%. 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.

-- As of the May 2024 payment date, the current overcollateralization amount is 0.65% relative to the target of 7.25% of the outstanding receivables balance. Additionally, the transaction structure includes a fully funded non-declining reserve account (RA) of 1.05% 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.

-- 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 (May 8, 2024), https://dbrs.morningstar.com/research/432485.

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 the 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 the 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 (March 21, 2024),
https://dbrs.morningstar.com/research/430003
-- Operational Risk Assessment for U.S. ABS Originators (March 21, 2024),
https://dbrs.morningstar.com/research/430004
-- Legal Criteria for U.S. Structured Finance (April 15, 2024),
https://dbrs.morningstar.com/research/431205
-- Rating U.S. Structured Finance Transactions (April 15, 2024),
https://dbrs.morningstar.com/research/431204
-- Rating U.S. Retail Auto Loan Securitizations (May 9, 2024),
https://dbrs.morningstar.com/research/432562

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