DBRS Morningstar Assigns Ratings to Merchants Fleet Funding LLC, Series 2022-3

DBRS, Inc. (DBRS Morningstar) assigned ratings to the classes issued by Merchants Fleet Funding LLC, Series 2022-3 as follows:

-- $343,836,945 Class A Notes at AAA (sf)
-- $14,210,000 Class B Notes at AA (sf)
-- $23,710,000 Class C Notes at A (sf)

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

-- The ratings on the Class A, B, and C Notes address the timely payment of Senior Monthly Funding Costs and the ultimate payment of principal on or before the Final Maturity Date. The transaction is structured with subordinated interest for the Class A, B, and C Notes (Contingent Monthly Interest), which is not addressed by DBRS Morningstar’s ratings.
--Transaction capital structure, ratings, and form and sufficiency of available credit enhancement.
Credit enhancement levels are sufficient to support DBRS Morningstar stressed loss assumptions under various scenarios.
--The yield supplement account is established to supplement the yield from any lease that does not meet a minimum yield requirement.
--The Transaction’s ability to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. The rating addresses the payment of timely interest on a monthly basis and principal by the Legal Final Maturity.
--Merchants' capabilities with regard to originations, underwriting, and servicing.
DBRS Morningstar conducted a telephone operational risk review of Merchants and, as a result, considers the Company an acceptable originator and servicer of fleet leases.
--The high credit quality and historical performance of the collateral.
--The leased vehicles are essential-use vehicles for customers; therefore, such leases are likely to be affirmed by an obligor in a bankruptcy proceeding.
--These leases are hell-or-high water and triple-net with no set-off language. The lessee is responsible to pay all taxes, title, and registration charges.
----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 2022 Update, published on December 21, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

The principal methodology applicable to the rating is Rating U.S. Auto Fleet Lease Securitizations
(https://www.dbrsmorningstar.com/research/367023; September 23, 2020).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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.

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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.