Morningstar DBRS Takes Credit Rating Actions on Eight Flagship Credit Auto Trust Transactions

DBRS, Inc. (Morningstar DBRS) upgraded eight credit ratings, confirmed 31 credit ratings and downgraded three credit ratings from eight Flagship Credit Auto Trust transactions as detailed in the summary chart below.

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

-- The collateral performance to date and Morningstar DBRS' assessment of future performance as of the February 2025 payment date.

-- Flagship Credit Auto Trust 2022-1 has amortized to a pool factor of 28.72% and has a current cumulative net loss (CNL) to date of 13.62%. Current CNL is tracking above Morningstar DBRS' initial base-case loss expectation of 10.75%. Consequently, the revised base-case loss expectation was increased to 16.50%. 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.

-- Flagship Credit Auto Trust 2022-2 has amortized to a pool factor of 33.70% and has a current CNL to date of 17.24%. Current CNL is tracking above Morningstar DBRS' initial base-case loss expectation of 10.60%. Consequently, the revised base-case loss expectation was increased to 23.50%. The current overcollateralization amount is 0.00% 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. The RA amount has declined since OC has been fully depleted. As a result, the current level of hard CE and estimated excess spread are insufficient to support the current credit rating on the Class D Notes and, consequently, the credit rating has been downgraded to a rating level commensurate with the current implied multiple. While CNL is tracking above the initial expectation, the Class A-3 Notes, the 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.

-- For the Class E Notes in Flagship Credit Auto Trust 2022-2, given the insufficient level of CE to support the full repayment of interest and principal, the credit rating was downgraded to `CCC' (sf) on September 16, 2024. In accordance with the applicable Morningstar DBRS credit rating methodology, there is a high probability that the Class E Notes will not receive the full interest and principal payments by the legal final maturity.

-- Flagship Credit Auto Trust 2022-3 has amortized to a pool factor of 37.55% and has a current CNL to date of 16.63%. Current CNL is tracking above Morningstar DBRS' initial base-case loss expectation of 10.75%. Consequently, the revised base-case loss expectation was increased to 23.75%. The current overcollateralization amount is 1.20% relative to the target of 6.70% of the outstanding receivables balance. Additionally, the transaction structure includes a fully funded non-declining reserve account (RA) of 1.00% of the initial aggregate pool balance. The RA amount has increased to 4.39% of the current pool balance. The current level of hard 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. While CNL is tracking above the initial expectation, the Class A-3 Notes, the Class B Notes, the Class C Notes and the Class D 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.

-- Flagship Credit Auto Trust 2022-4 has amortized to a pool factor of 43.60% and has a current CNL to date of 14.16%. Current CNL is tracking above Morningstar DBRS' initial base-case loss expectation of 10.15%. Consequently, the revised base-case loss expectation was increased to 21.75%. The current overcollateralization amount is 7.75% relative to the target of 9.90% of the outstanding receivables balance. Additionally, the transaction structure includes a fully funded non-declining reserve account (RA) of 1.00% of the initial aggregate pool balance. The RA amount has increased to 3.24% of the current pool balance. The current level of hard 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. While CNL is tracking above the initial expectation, the Class A-3 Notes, the Class B Notes, the Class C Notes and the Class D 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.

-- For Flagship Credit Auto Trust 2023-1, Flagship Credit Auto Trust 2023-2, Flagship Credit Auto Trust 2023-3, and Flagship Credit Auto 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 is sufficient to support the Morningstar DBRS projected remaining CNL assumptions at multiples of coverage commensurate with the credit ratings.

-- The transaction parties' capabilities with regard to 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 December 2024 Update," published on December 19, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

Flagship Credit Auto Trust 2022-1, Flagship Credit Auto Trust 2022-2, Flagship Credit Auto Trust 2022-3, Flagship Credit Auto Trust 2022-4, Flagship Credit Auto Trust 2023-1, Flagship Credit Auto Trust 2023-2
Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Flagship Credit Auto Trust 2023-3
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. 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.

Flagship Credit Auto Trust 2024-1
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 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 (January 10, 2025) https://dbrs.morningstar.com/research/445740.

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 this 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.

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 (December 05, 2024),
https://dbrs.morningstar.com/research/444162

-- Legal Criteria for U.S. Structured Finance (December 03, 2024),
https://dbrs.morningstar.com/research/444064

-- Rating U.S. Structured Finance Transactions (March 10, 2025),
https://dbrs.morningstar.com/research/449616

-- 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.