Morningstar DBRS Assigns Provisional Credit Ratings to Strike Acceptance Auto Funding Trust 2025-1

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the classes of notes to be issued by Strike Acceptance Auto Funding Trust 2025-1 (the Issuer) as follows:

-- $83,387,000 Class A Notes at (P) A (low) (sf)
-- $10,492,000 Class B Notes at (P) BBB (low) (sf)
-- $14,091,000 Class C Notes at (P) BB (low) (sf)

CREDIT RATING RATIONALE/DESCRIPTION

The provisional credit ratings are based on Morningstar DBRS' 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, and available excess spread. Credit enhancement levels are sufficient to support the Morningstar DBRS-projected cumulative net loss (CNL) assumption under various stress scenarios.

(2) 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 rating on Class A Notes, Class B Notes and Class C notes address the payment of timely interest on a monthly basis and the ultimate payment of principal by the final scheduled payment date.

(3) The transaction assumptions consider Morningstar DBRS's baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2024 Update, published on December 19, 2024. These baseline macroeconomic scenarios replace DBRS Morningstar's moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

(4) Morningstar DBRS used proxy analysis in its development of an expected loss.
-- Given the time in operation, a limited amount of performance data was available for the Company's originations going back to Q1 2020.
-- Industry comparable data was used to derive assumptions along with a limited amount of Company performance data.
-- The Morningstar DBRS CNL assumption is 24.64% for the transaction based on the Statistical Pool
-- The Class A, Class B and Class D coverage multiples are in some cases below the Morningstar DBRS range of multiples set forth in the criteria for this asset class. Morningstar DBRS believes that this is warranted, given the magnitude of expected loss and structural features of the transaction.
(5) The capabilities of Strike with regard to originations, underwriting, and servicing.
-- Morningstar DBRS has performed an operational review of Strike and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with a backup servicer that is acceptable to Morningstar DBRS. For this transaction, Computershare Trust Company, N.A. ("Computershare") will be the backup servicer.
-- All paper and electronic titles are stored with Dealertrack, all physical contracts are stored with Computershare and eOriginal is the vault provider for the e-contracts.
-- The Strike senior management team has considerable experience and a successful track record within the auto finance industry.

(6) The legal structure and presence of legal opinions that are expected to address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with Strike, that the trust has a valid first-priority security interest in the assets, and the consistency with Morningstar DBRS 's Legal Criteria for U.S. Structured Finance.

Morningstar DBRS' credit rating on the securities referenced herein addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Noteholders' Monthly Interest Distributable Amount and the related Note Balance.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND 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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings https://dbrs.morningstar.com/research/437781/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-factors-in-credit-ratings (August 13, 2024).

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

The principal methodology applicable to the credit rating is Rating U.S. Retail Auto Loan Securitizations (August 6, 2024; https://dbrs.morningstar.com/research/437569)

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

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

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

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

Rating U.S. Structured Finance Transactions (November 18, 2024)
https://dbrs.morningstar.com/research/443136

Operational Risk Assessment for U.S. ABS Originators and Servicers (December 05, 2024)
https://dbrs.morningstar.com/research/444162/operational-risk-assessment-for-us-abs-servicers

Legal Criteria for U.S. Structured Finance (December 03, 2024)
https://dbrs.morningstar.com/research/444064

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.