DBRS Morningstar Takes Credit Rating Actions on Oportun Issuance Trust 2022-3

DBRS, Inc. (DBRS Morningstar) downgraded and confirmed its credit ratings on Oportun Issuance Trust 2022-3, as follows:

-- Class A Notes confirmed at AA (low) (sf)
-- Class B Notes confirmed at A (low) (sf)
-- Class C Notes confirmed at BBB (low) (sf)
-- Class D Notes downgraded to B (sf) from BB (sf)

The credit rating actions are based on the following analytical considerations:

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

-- The collateral performance to date and DBRS Morningstar's assessment of future performance. As of the October 2023 payment date, Oportun Issuance Trust 2022-3 has amortized to a pool factor of 59.74%, and to date has current cumulative net losses (CNLs) of 8.25%. Current CNL is tracking well above DBRS Morningstar’s initial base-case loss expectations of 11.23%. While credit enhancement (CE) has increased for all outstanding notes, the CE growth for the subordinate notes has been limited due to the higher CNLs.

-- Because of the weaker-than-expected performance, DBRS Morningstar has revised the base-case loss expectation for Oportun Issuance Trust 2022-3 to 17.75%. As a result, the current level of hard CE and estimated excess spread are insufficient to support the current rating on the Class D Notes and, consequently, it has been downgraded to a rating level commensurate with the current implied multiple.

-- As of the October 2023 payment date, Oportun Issuance Trust 2022-3 has a current OC amount of 10.44% relative to the target of 11.50% of the outstanding receivables balance. Additionally, the transaction is structured to include a reserve fund (RF) that has a target of 0.25% of the outstanding receivable balance. Consequently, as the transaction amortizes, the RF amount will decline and represent a smaller portion of available CE.

-- For Oportun Issuance Trust 2022-3, the transaction includes Class D Notes with a current rating of B (sf). While the DBRS Morningstar “Rating U.S. Structured Finance Transactions” and “Rating U.S. Credit Card Asset-Backed Securities” methodologies do not set forth a range of multiples for this asset class at the B (sf) level, the analytical approach for this rating level is consistent with that contemplated by the methodologies. The typical range of multiples applied in the DBRS Morningstar stress analysis for B (sf) ratings is 1.00x to 1.25x.

-- The transaction includes a Cumulative Default Ratio Amortization Event that, if tripped, would cause a lockout of any distributions to the Certificateholders. As of the October 2023 payment date, the transaction has not breached the Cumulative Default Ratio Amortization Event.

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

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/416784 (July 4, 2023).

Notes:
The principal methodology applicable to the credit ratings is “DBRS Morningstar Master U.S. ABS Surveillance” (July 20, 2023; https://www.dbrsmorningstar.com/research/417414).

Other methodologies referenced in these transactions 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 credit ratings were initiated at the request of the rated entities.

The rated entities or their related entities did participate in the rating process for these credit rating actions.
DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entities or their related entities in connection with these rating actions.

These are solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
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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.

Operational Risk Assessment for U.S. ABS Servicers (July 20, 2023), https://www.dbrsmorningstar.com/research/417415
Operational Risk Assessment for U.S. ABS Originators (July 20, 2023), https://www.dbrsmorningstar.com/research/417416
Legal Criteria for U.S. Structured Finance (December 7, 2022)
https://www.dbrsmorningstar.com/research/407008
Rating U.S. Structured Finance Transactions (September 25, 2023)
https://www.dbrsmorningstar.com/research/421053
Rating U.S. Credit Card Asset-Backed Securities (July 24, 2023)
https://www.dbrsmorningstar.com/research/417562

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