DBRS Morningstar Places One Class of Skopos Auto Receivables Trust 2019-1 Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) placed the following class issued by Skopos Auto Receivables Trust 2019-1 Under Review with Negative Implications:

-- Class E Notes rated B (sf)

This rating action is based on the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: June Update,” published on June 1, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on June 1, 2020, and are reflected in DBRS Morningstar’s rating analysis. The assumptions consider the moderate macroeconomic scenario outlined in the commentary (the moderate scenario serving as the primary anchor for current ratings) in addition to observed performance during the 2008–09 financial crisis and the possible impact of stimulus from the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020.

-- The DBRS Morningstar adjusted expected loss assumption, taking into consideration deal performance to date as well as the impact of the coronavirus pandemic which increases the likelihood of increased delinquent or nonperforming loans that may result in increased losses.

-- The transaction’s current form and sufficiency of available credit enhancement benefitting the notes. The level of credit enhancement in the form of overcollateralization, amounts held in reserve and subordination has grown for senior classes as the transaction has amortized due to the sequential pay nature of the transaction. However, the credit enhancement has not grown at the same rate for the Class E Notes, which are the most subordinated notes in the transaction. The available credit enhancement including excess spread may be insufficient to support the DBRS Morningstar projected remaining cumulative net loss (including an adjustment for the moderate scenario) assumption at a multiple of coverage commensurate with the current rating on the Class E Notes.

When placing a rating Under Review with Negative Implications, DBRS Morningstar seeks to complete its assessment and remove the rating from this status as soon as appropriate. Upon the resolution of the Under Review status, DBRS Morningstar may confirm or downgrade the ratings on the affected classes.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
The principal methodology is DBRS Morningstar Master U.S. ABS Surveillance (May 27, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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