DBRS Morningstar Takes Rating Action on Foursight Capital Automobile Receivables Trust 2018-2

DBRS, Inc. (DBRS Morningstar) confirmed the BBB (sf) rating on the Class F Notes issued by Foursight Capital Automobile Receivables Trust 2018-2. Additionally, DBRS Morningstar removed the Class F Notes from Under Review with Negative Implications.

The confirmation and the removal of the rating from Under Review with Negative Implications is based on the following analytical considerations:
-- The collateral performance to date and DBRS Morningstar's assessment of future performance, including upward revisions to the expected cumulative net loss (CNL) assumptions consistent with the unemployment levels in the moderate macroeconomic scenario (please refer to next bullet). After a spike in extensions and delinquencies, which peaked in April 2020 as a result of the rise in unemployment from the shutdown of non-essential businesses and stay in place orders, performance has since improved and stabilized. DBRS Morningstar believes obligors benefited from past U.S. stimulus measures. Although, we continue to monitor and assess the impact of the recently passed U.S. stimulus package, announced in December 2020, which is also expected to aid obligors and bolster collateral performance; uncertainty remains with respect to the overall effect on obligors’ ability to pay and the impact on losses.

-- 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: December Update,” published on December 2, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on December 2, 2020, and are reflected in DBRS Morningstar’s rating analysis (please refer to next bullet).

-- 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 factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.

-- The transactions’ capital structure, and form and sufficiency of available credit enhancement. The current level of hard credit enhancement and estimated excess spread are sufficient to support DBRS Morningstar’s remaining projected cumulative net loss assumption (including an adjustment for the moderate macroeconomic scenario) at a multiple of coverage commensurate with the ratings.

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

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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