DBRS Morningstar Takes Rating Actions on Two Skopos Auto Receivables Trust Transactions

DBRS, Inc. (DBRS Morningstar) confirmed, upgraded, discontinued, or maintained the Under Review with Negative Implications status on its ratings on the following classes of securities included in two Skopos Auto Receivables Trust transactions:

Skopos Auto Receivables Trust 2018-1
-- Class A Notes, discontinued due to repayment
-- Class B Notes, discontinued due to repayment
-- Class C Notes, upgraded to AA (low) (sf)
-- Class D Notes, confirmed at BB (sf)

Skopos Auto Receivables Trust 2019-1
-- Class A Notes, upgraded to AAA (sf)
-- Class B Notes, upgraded to AA (sf)
-- Class C Notes, upgraded to A (sf)
-- Class D Notes, confirmed at BB (sf)
-- Class E Notes, maintain Under Review with Negative Implications

The rating actions are 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: September Update,” published on September 10, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on September 10, 2020, and are reflected in DBRS Morningstar’s rating analysis.

-- The assumptions consider 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. Observed performance during the 2008–09 financial crisis and the possible impact from stimulus were also incorporated into the analysis.

-- The collateral performance to date and DBRS Morningstar's assessment of future performance, including upward revisions to the expected CNL assumptions consistent with the expected unemployment levels in the moderate scenario.

-- The level of hard credit enhancement in the form of overcollateralization, subordination, and amounts held in reserve funds has grown as the transactions have amortized because of their sequential-pay nature. As a result, hard credit enhancement and estimated excess spread are sufficient to support the DBRS Morningstar-projected remaining cumulative net loss (CNL) (including an adjustment for the moderate scenario) assumption at a multiple of coverage commensurate with the upgraded and confirmed ratings above.

-- For the Skopos Auto Receivables Trust 2019-1 transaction 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 series 2019-1 Class E Notes. DBRS Morningstar maintained the Under Review with Negative Implications status on its rating.

-- Performance on these transactions has improved over the last several months as a result of improved consumer behavior due to the stimulus from the CARES Act, however uncertainty of future performance remains. DBRS Morningstar will continue to evaluate performance of the transactions and the potential effects of further stimulus packages and any updates to the moderate scenario.

-- The transaction parties’ capabilities with regard to origination, underwriting, and servicing.

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. 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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