DBRS Morningstar Finalizes Provisional Ratings on CIG Auto Receivables Trust 2020-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) issued by CIG Auto Receivables Trust 2020-1 (the Issuer):

-- $116,940,000 Class A Notes at AAA (sf)
-- $18,290,000 Class B Notes at AA (sf)
-- $8,660,000 Class C Notes at A (sf)
-- $25,510,000 Class D Notes at BBB (sf)
-- $11,070,000 Class E Notes at BB (sf)

The ratings are based on DBRS Morningstar’s review of the following analytical considerations:

-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, subordination, amounts held in the reserve fund, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar-projected expected cumulative net loss assumption under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the rating addresses the timely payment of interest on a monthly basis and payment of principal by the legal final maturity date.
-- DBRS Morningstar’s projected CNL assumption includes an assessment of how collateral performance could deteriorate because of macroeconomic stresses related to the Coronavirus Disease (COVID-19) pandemic.
-- The transaction assumptions considered DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary Global Macroeconomic Scenarios: September Update, published on September 10, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020 and have been regularly updated. The scenarios were last updated on September 10, 2020, and are reflected in DBRS Morningstar’s rating analysis. The assumptions considered the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario remains predicated on a more rapid return of confidence and a steady recovery heading into 2021.
-- The capabilities of CIG Financial, LLC (CIG) with regard to originations, underwriting, and servicing.
-- The CIG senior management team has considerable experience and a successful track record within the auto finance industry, having managed the company through multiple economic cycles.
-- The quality and consistency of provided historical static pool data for CIG originations and performance of the CIG auto loan portfolio.
-- The legal structure and presence of legal opinions that addressed the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with CIG, that the trust has a valid first-priority security interest in the assets, and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance” methodology.

The CIGAR 2020-1 transaction represents the second public term securitization of subprime auto loans and will offer both senior and subordinate rated securities. The receivables securitized in CIGAR 2020-1 are subprime automobile loan contracts secured primarily by used automobiles, light-duty trucks, minivans, and sport-utility vehicles.

The rating on the Class A Note reflects the 40.75% of initial hard credit enhancement provided by the subordinated notes in the pool (33.00%), the Reserve Account (1.50%), and overcollateralization (6.25%). The ratings on the Class B, C, D, and E Notes reflect 31.25%, 26.75%, 13.50%, and 7.75% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

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:
All figures are in in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Retail Auto Loan Securitizations (May 13, 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 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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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