Morningstar DBRS Assigns Provisional Credit Ratings to Flagship Credit Auto Trust 2024-3

DBRS, Inc. (Morningstar DBRS) assigned provisional ratings to the following classes of notes to be issued by Flagship Credit Auto Trust 2024-3 (FCAT 2024-3 or the Issuer):

-- $84,640,000 Class A Notes at (P) AAA (sf)
-- $18,810,000 Class B Notes at (P) AA (sf)
-- $22,690,000 Class C Notes at (P) A (sf)
-- $15,670,000 Class D Notes at (P) BBB (sf)
-- $11,640,000 Class E Notes at (P) BB (SF)

CREDIT RATING RATIONALE/DESCRIPTION

Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.

-- Credit enhancement is in the form of overcollateralization (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.
-- The DBRS Morningstar CNL assumption is 13.60%, based on the expected Cut-Off Date pool composition.
-- The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns: September 2024 Update, published on September 25, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.
-- The consistent operational history of Flagship Credit Acceptance, LLC (Flagship or the Company) 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 capabilities of Flagship with regard to originations, underwriting, and servicing.
-- Morningstar DBRS performed an operational review of Flagship and considers the entity an acceptable originator and servicer of subprime and non-prime automobile loan contracts with an acceptable backup servicer.
-- The Company indicated 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 there is no material pending or threatened litigation.
-- The legal structure and presence of legal opinions that will 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 the Morningstar DBRS "Legal Criteria for U.S. Structured Finance."
-- Flagship is an independent, full-service automotive financing and servicing company that provides (1) financing to borrowers who do not typically have access to prime credit-lending terms to purchase late-model vehicles and (2) refinancing of existing automotive financing.
Morningstar DBRS' credit rating on Class A, Class B, Class C, Class D, and Class E Notes 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 nonpayment 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 the interest on unpaid Accrued Note 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. 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, 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 Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

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 (August 6, 2024) https://dbrs.morningstar.com/research/437569.

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.

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.
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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 Originators and Servicers (August 6, 2024),
https://dbrs.morningstar.com/research/437545
-- Rating U.S. Structured Finance Transactions (August 6, 2024),
https://dbrs.morningstar.com/research/437571
-- Legal Criteria for U.S. Structured Finance (April 15, 2024),
https://dbrs.morningstar.com/research/431205

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