Morningstar DBRS Takes Credit Rating Actions on Four Arivo Acceptance Auto Loan Receivables Trust Transactions

DBRS, Inc. (Morningstar DBRS) confirmed 10 credit ratings, upgraded four credit ratings, and placed one credit rating Under Review with Negative Implications from four Arivo Acceptance Auto Loan Receivables Trust transactions as detailed in the summary chart below.

The credit rating actions are based on the following analytical considerations:

-- The credit rating actions are the result of collateral performance as of the October 2024 payment date, and Morningstar DBRS' assessment of future performance assumptions.

-- For Arivo Acceptance Auto Loan Receivables Trust 2021-1, losses are tracking below the Morningstar DBRS initial base-case cumulative net loss (CNL) expectation. The current level of hard credit enhancement (CE) and estimated excess spread are sufficient to support the Morningstar DBRS projected remaining CNL assumptions at a multiple of coverage commensurate with the credit ratings.

-- For Arivo Acceptance Auto Loan Receivables Trust 2022-1 and Arivo Acceptance Auto Loan Receivables Trust 2024-1, although losses are tracking above the Morningstar DBRS initial base-case CNL expectations, the current level of hard CE and estimated excess spread are sufficient to support the Morningstar DBRS projected remaining CNL assumptions at a multiple of coverage commensurate with the credit ratings.

-- Arivo Acceptance Auto Loan Receivables Trust 2022-2 has amortized to a pool factor of 53.97% and a current CNL to date of 14.32%. Current CNL is tracking above Morningstar DBRS' initial base-case loss expectation of 9.10%. While current CE has increased for the Class A Notes, Class B Notes, and Class C Notes, CE has declined for the Class D Notes.

-- Because of weaker-than-expected performance, Morningstar DBRS has revised the base-case loss expectation for Arivo Acceptance Auto Loan Receivables Trust 2022-2 to 20.00%. As a result, the current level of hard CE and estimated excess spread may be insufficient to support the current credit rating on the Class D Notes. Consequently, Morningstar DBRS has placed the current credit rating on the Class D Notes Under Review with Negative Implications. While CNL is tracking above initial expectation, the Class A Notes, Class B Notes, and the Class C Notes have benefited from deleveraging and have sufficient CE commensurate with the current credit ratings, and Morningstar DBRS has confirmed the credit ratings on these classes.

-- As of the October 2024 payment date, Arivo Acceptance Auto Loan Receivables Trust 2022-2 has a current overcollateralization (OC) amount of 0.57% relative to the target of 12.00% of the outstanding receivables balance. Additionally, the transaction structure initially included a fully funded non-declining cash collateral account (CCA) of 1.25% of the initial aggregate pool balance. As the transaction continues to amortize, the CCA percentage will increase as it will represent a larger portion of available CE.

--On February 15, 2024, the Arivo Acceptance Auto Loan Receivables Trust 2022-2 Indenture was amended, increasing the Required CCA balance from 1.25% to 2.37%. A Capital contribution of $3,000,000 was made by Arivo Acceptance, LLC to Arivo Acceptance Loan Receivables Trust 2022-2 to the CCA. As of October 15th, the CCA was fully funded and equal to $6,531,584.63.

--The transaction parties' capabilities regarding originating, underwriting, and servicing.

-- 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 pandemic scenarios, which were first published in April 2020.

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:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (August 06, 2024) https://dbrs.morningstar.com/research/437535.

Other methodologies referenced in these transactions 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.

These are solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

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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 06, 2024),
https://dbrs.morningstar.com/research/437545

-- Legal Criteria for U.S. Structured Finance (October 28, 2024),
https://dbrs.morningstar.com/research/441840

-- Rating U.S. Structured Finance Transactions (November 18, 2024),
https://dbrs.morningstar.com/research/443136

-- Rating U.S. Retail Auto Loan Securitizations (August 06, 2024), https://dbrs.morningstar.com/research/437569

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