Press Release

Morningstar DBRS Assigns Provisional Credit Ratings to Hertz Vehicle Financing III LLC, Series 2025-3 and 2025-4

Auto
June 13, 2025

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes (collectively, the Notes) to be issued by Hertz Vehicle Financing III LLC (HVF III):

-- $171,250,000 Series 2025-3, Class A Notes at (P) AAA (sf)
-- $25,000,000 Series 2025-3, Class B Notes at (P) A (sf)
-- $33,750,000 Series 2025-3, Class C Notes at (P) BBB (sf)
-- $20,000,000 Series 2025-3, Class D Notes at (P) BB (sf)
-- $171,250,000 Series 2025-4, Class A Notes at (P) AAA (sf)
-- $25,000,000 Series 2025-4, Class B Notes at (P) A (sf)
-- $33,750,000 Series 2025-4, Class C Notes at (P) BBB (sf)
-- $20,000,000 Series 2025-4, Class D Notes at (P) BB (sf)

CREDIT RATING RATIONALE/DESCRIPTION
The provisional credit ratings are based on Morningstar DBRS' review of the following analytical considerations:

(1) Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of subordination, overcollateralization (OC), letters of credit (LOCs), and any amounts held in the reserve account support the Morningstar DBRS stress-case liquidation analysis with bankruptcy and liquidation period assumptions that vary by rating category and vehicle type (program versus nonprogram) as well as residual value stresses that vary by rating category for nonprogram vehicles and program vehicles from non-investment-grade-rated manufacturers.
-- Liquid credit enhancement will be provided in the form of a reserve account and/or an LOC sufficient to cover interest on the Notes, consistent with Morningstar DBRS' criteria for this asset class.

(2) Credit enhancement in the transaction is dynamic, depending on the composition of the vehicles in the fleet and certain market value tests.
--The enhancement in the transaction depends on whether the vehicles are program or nonprogram, whether the manufacturer is investment grade or below investment grade, and if a vehicle is a medium-duty truck.
-- For nonprogram vehicles, the enhancement levels may increase as a result of two market value tests: (1) a marked-to-market (MTM) test that compares the market value of the vehicles with the net book value (NBV) of these vehicles and (2) a disposition proceeds test that compares the actual disposition proceeds of vehicles sold with the NBV of those vehicles.
-- If the credit enhancement required in the transaction increases and HVF III is unable to meet the increased enhancement levels, then an Amortization Event may occur that will result in a Rapid Amortization of the notes.
-- The required credit enhancement is subject to a floor of 11.05% of the assets.

(3) Amortization Events include, but are not limited to, default in the payment of amounts due after five consecutive business days, default in the payments of amounts due by the expected final payment date, deficiency of amounts available in the liquidity reserve account, payment default under the master lease, the required asset amount exceeding the aggregate asset amount, servicer default, and administrator default.

(4) The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the documents. The credit ratings address the timely payment of interest to the Class A, Class B, Class C, and Class D noteholders at their respective note rates as well as ultimate payment of principal on the notes, in each case by the legal final payment date.

(5) The intention of each party to the master lease to treat the lease as a single indivisible lease.

(6) The transaction allows vehicles, for which the Collateral Agent has not yet been noted on the Certificates of Title as lienholder, to remain as eligible assets for up to 45 days for new vehicles and 60 days for used vehicles (Lien Holidays). All vehicles benefit from a negative pledge.

(7) Inclusion of medium-duty trucks that are subject to a limit of 5% and a required credit enhancement of 35%.

(8) Tesla vehicles are subject to a concentration limit of 10.0%, reduced from 17.5%.

(9) The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns March 2025 Update, published on March 26, 2025. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

(10) The transaction parties' capabilities to effectively manage rental car operations and dispose of the fleet to the extent necessary.
-- Morningstar DBRS has performed an operational review of Hertz and considers the entity a capable rental fleet operator and manager.
-- Lord Securities Corporation is the backup administrator for this transaction, and defi AUTO, LLC is the backup disposition agent.

(11) The legal structure and its consistency with Morningstar DBRS' "Legal Criteria for U.S. Structured Finance" methodology, the provision of legal opinions that address the treatment of the operating lease as a true lease, the nonconsolidation of the special-purpose vehicles with Hertz and its affiliates, and that the trust has a valid first-priority security interest in the assets.

Morningstar DBRS' credit ratings on the securities referenced herein address 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 Monthly Interest Amount and the related Principal Amount.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. The associated contractual payment obligation that is not a financial obligation for each of the rated Notes is the related interest on any unpaid Monthly Interest Amount.

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 (May 16, 2025) https://dbrs.morningstar.com/research/454196.

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

The principal methodology applicable to the credit ratings is Rating U.S. Rental Car Securitizations (August 6, 2024) https://dbrs.morningstar.com/research/437564.

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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 the final credit ratings on the above-mentioned securities are 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.
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.

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

Operational Risk Assessment for U.S. ABS Originators and Servicers (March 26, 2025) https://dbrs.morningstar.com/research/450709

Legal Criteria for U.S. Structured Finance (December 3, 2024) https://dbrs.morningstar.com/research/444064

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

Ratings

Hertz Vehicle Financing III LLC, Series 2025-3
Hertz Vehicle Financing III LLC, Series 2025-4
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.