DBRS Morningstar Finalizes Provisional Ratings on GTE Auto Receivables Trust 2023-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes issued by GTE Auto Receivables Trust 2023-1 (the Issuer):

-- $34,550,000 Class A-1 Notes at R-1 (high) (sf)
-- $83,560,000 Class A-2 Notes at AAA (sf)
-- $42,390,000 Class A-3 Notes at AAA (sf)
-- $25,000,000 Class A-4 Notes at AAA (sf)
-- $7,000,000 Class B Notes at AA (high) (sf)
-- $5,250,000 Class C Notes at A (high) (sf)
-- $5,000,000 Class D Notes at BBB (high) (sf)

The ratings are based on DBRS Morningstar’s review 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 overcollateralization (OC), subordination, amounts held in the reserve fund, yield supplement OC, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar-projected cumulative net loss (CNL) assumption under various stress scenarios.

(2) GTE Federal Credit Union’s (GTE Financial or the Company) history as an originator in the retail auto loan business within the middle-west Florida region as well as its capabilities to conform to its policies and procedures with respect to underwriting and servicing.
-- DBRS Morningstar has performed an operational review of GTE Financial and considers the entity to be an acceptable originator and servicer of prime and near-prime automobile loans. In addition, U.S. Bank National Association is the backup servicer.
-- Company management has considerable experience, with over 20 years on average of experience in the consumer lending business.

(3) The credit quality of the collateral and the consistent performance of GTE Financial's auto loan portfolio.

(4) The DBRS Morningstar CNL assumption is 1.90% based on the cut-off date pool composition.

(5) The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: April 2023 Update,” published on April 28, 2023. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

(6) The legal structure and legal opinions that address the true sale of the assets to the Issuer, the nonconsolidation of each of the depositor and the Issuer with GTE Financial, 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.”

(7) GTE Financial intends for the transaction to comply with the National Credit Union Administration (NCUA) rule as well as the statutes, regulations, and rules governing a federal credit union’s powers. Under the NCUA rule covenant included in the transaction, it, as sponsor and servicer, covenants to perform functions specified in the NCUA rule which provides further assurances that the transaction complies with necessary legal and regulatory requirements.

GTE Financial is a federal-chartered credit union based in Tampa, Florida. It provides deposit and lending services for its members, primarily in the middle-west region of Florida. It makes motor vehicle loans directly to its members and originates retail installment sales contracts through franchised and independent motor vehicle dealerships. As a credit union, the Company is a not-for-profit organization owned by its members (depositors). It is regulated as a low-income designated credit union by the NCUA, and its deposits are insured by the National Credit Union Share Insurance Fund.

The ratings on the Class A-1, Class A-2, Class A-3, and Class A-4 Notes reflect 9.47% of initial hard credit enhancement provided by subordinated notes in the pool (8.47%), the reserve account (0.50%), and OC (0.50%). The ratings on the Class B, Class C, and Class D Notes reflect 6.03%, 3.45%, and 1.00% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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 (May 17, 2022).

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

The principal methodology applicable to the ratings is Rating U.S. Retail Auto Loan Securitizations (May 10, 2022; https://www.dbrsmorningstar.com/research/396623).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity. The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action. This is a solicited credit rating.

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.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

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

Rating U.S. Structured Finance Transactions (February 6, 2023) https://www.dbrsmorningstar.com/research/409449/rating-us-structured-finance-transactions

Operational Risk Assessment for U.S. ABS Servicers (April 5, 2023)
https://www.dbrsmorningstar.com/research/412303/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (April 5, 2023)
https://www.dbrsmorningstar.com/research/412302

Legal Criteria for U.S. Structured Finance (December 7, 2022) https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance.

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