DBRS Morningstar Finalizes Its Provisional Ratings on Wheels Fleet Lease Funding 1 LLC, Series 2022-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes issued by Wheels Fleet Lease Funding 1 LLC, Series 2022-1 (the Issuer):

-- $453,500,000 Class A Notes at AAA (sf)
-- $14,200,000 Class B Notes at AA (sf)
-- $20,200,000 Class C Notes at A (sf)

The rating on the Notes is based on DBRS Morningstar’s review of the following considerations:

-- On October 27, 2021 Athene Holding Ltd. (Athene, an affiliate of Donlen LLC. (Donlen)) closed a transaction in which it combined Wheels, Inc. (Wheels) and Donlen. The combined company has approximately $5 billion in assets and is the second largest fleet lease company in the U.S. and Canada. Wheels was converted from an Illinois corporation to an Illinois limited liability company and became a wholly-owned subsidiary of Donlen.

-- DBRS Morningstar conducted a telephone operational risk review of Wheels on December 6, 2021 and as a result considers Wheels to be an acceptable originator and servicer of automobile fleet leases. Separately, DBRS Morningstar conducted a telephone operational risk review surveillance update of Donlen on January 25, 2022 which noted no material changes from the last update other than the purchase of Wheels. As a result, DBRS Morningstar continues to deem Donlen to be an acceptable originator and servicer of automobile fleet leases.

-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.

-- Credit enhancement levels sufficient to support DBRS Morningstar’s stressed loss assumptions under various stress scenarios.

-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios For Rated Sovereigns December 2021 Update, published on December 9, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that recent COVID-19 developments, particularly the new Omicron variant with subsequent restrictions, combined with rising inflation pressures in some regions, may dampen near-term growth expectations in coming months. However, DBRS Morningstar expects the baseline projections will continue to point to an ongoing, gradual recovery .

-- While the ongoing coronavirus pandemic has had an adverse effect on the U.S. corporate borrower in general, performance of the underlying receivables in this transaction is expected to remain resilient. A diverse group of corporate obligors are making lease payments as well as covering shortfalls in book value at lease end. Further, as auto fleets are typically essential to a company's operations, leases are likely to be affirmed in case of insolvency. Finally, credit enhancement present in the transaction provides significant coverage of historically minimal losses experienced in auto fleet lease portfolios.

-- The high credit quality and historical performance of the collateral.

-- These leases are “hell or high water” and triple net with no set-off language and lessee responsibility for all taxes/expenses.

-- The legal structure and presence of legal opinions that address the true sale of the assets, the non-consolidation of the Issuer with Wheels, the non-consolidation of the Issuer with Donlen, the Issuer’s valid first-priority security interest in the assets, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance” methodology.

Credit Enhancement

The Class A credit enhancement is 13.00% of the Series 2022-1 Required Asset Amount and consists of subordination (9.00%, as a percentage of the Series 2022-1 Required Asset Amount), overcollateralization (OC; 3.28%), and an initial cash reserve (0.73%). The Class B credit enhancement is 10.25% and consists of subordination (6.25%), OC (3.28%), and an initial cash reserve (0.73%). The Class C credit enhancement is 6.34% and consists of subordination (2.34%), OC (3.28%), and an initial cash reserve (0.73%).

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. Auto Fleet Lease Securitizations (September 23, 2020) and Rating U.S. Auto Lease Securitizations (November 4, 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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