DBRS Morningstar Assigns Provisional Ratings to Prestige Auto Receivables Trust 2021-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of notes to be issued by Prestige Auto Receivables Trust 2021-1 (the Issuer):

-- $41,900,000 Class A-1 Notes at R-1 (high) (sf)
-- $90,000,000 Class A-2 Notes at AAA (sf)
-- $42,460,000 Class A-3 Notes at AAA (sf)
-- $42,910,000 Class B Notes at AA (sf)
-- $46,810,000 Class C Notes at A (sf)
-- $29,900,000 Class D Notes at BBB (low) (sf)
-- $14,790,000 Class E Notes at BB (sf)

The provisional ratings are based on a review by DBRS Morningstar of the following analytical considerations:

(1) Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination, overcollateralization (OC), amounts held in the reserve account, and excess spread. Credit enhancement levels are sufficient to support DBRS Morningstar-projected expected cumulative net loss (CNL) assumptions 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 ratings address the timely payment of interest on a monthly basis and the payment of principal by the Legal Final Maturity Date.

(2) The transaction parties’ capabilities with regard to originations, underwriting, and servicing.
-- DBRS Morningstar has performed an operational review of Prestige Financial Services, Inc. (Prestige or the Company) and considers the entity to be an acceptable originator and servicer of subprime auto receivables. Additionally, the transaction has an acceptable backup servicer.
-- The Company’s management team has extensive experience. Prestige has been lending to the subprime auto sector since 1994 and has considerable experience lending to Chapter 7 and 13 obligors.

(3) The credit quality of the collateral and performance of Prestige’s auto loan portfolio.
-- Prestige shared vintage CNL data with DBRS Morningstar that dates back to 2009. The data was broken down by credit tier, payment-to-income ratio, and other buckets. The analysis indicated a pattern of increasing losses that was consistent with expected trends.
-- The Company continues to evaluate and adjust its underwriting standards as necessary to target and maintain the credit quality of its loan portfolio.
-- DBRS Morningstar rating category loss multiples for each rating assigned are within the published criteria.

(4) The DBRS Morningstar CNL assumption is 13.95% based on the expected cut-off date pool composition.
-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns,” published on September 8, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that, although coronavirus remains a risk to the outlook, uncertainty around the macroeconomic effects of the pandemic has gradually receded. Current median forecasts considered in the baseline macroeconomic scenarios incorporate some risks associated with further outbreaks, but remain fairly positive on recovery prospects given expectations of continued fiscal and monetary policy support. The policy response to coronavirus may nonetheless bring other risks to the forefront in the coming months and years.

(5) The legal structure and presence of legal opinions will address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with Prestige, that the Issuer has a valid first-priority security interest in the assets, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

The ratings on the Class A-1, Class A-2, and Class A-3 Notes reflect 47.35% of initial hard credit enhancement provided by subordinated notes in the pool (41.35%), the reserve account (1.00%), and OC (5.00%). The ratings on the Class B, Class C, Class D, and Class E Notes reflect 34.15%, 19.75%, 10.55%, and 6.00% 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating U.S. Retail Auto Loan Securitizations (May 10, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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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