Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to five classes of notes issued by DT Auto Owner Trust 2021-2 ("DTAOT 2021-2"), a $435.0 million auto loan ABS transaction.
This transaction is the second 2021 ABS securitization issued by DriveTime Automotive Group, Inc. ("DriveTime" or the "Company"). DriveTime is a leading used vehicle retailer in the United States that focuses on both the sale and financing of vehicles to subprime borrowers. The transaction has initial credit enhancement levels ranging from 54.50% for the Class A notes, to 14.50% for the Class E notes. The target enhancement levels for the Class A notes and Class E notes are 58.90% and 18.90%, respectively.
The financial impact of COVID-19 has resulted in an economic slowdown and high unemployment, which can adversely impact the performance of the subject pool and auto loans in general. In considering this risk, KBRA applied additional stress scenarios by increasing its expected base case gross charge-off assumptions for this transaction. The assumption increase was derived from KBRA’s analysis of the relationship between the historical unemployment rate and annualized gross loss rates through the 2008-2009 financial crisis for different types of lending products.
KBRA applied its Auto Loan ABS Global Rating Methodology and Global Structured Finance Counterparty Methodology. In applying the methodologies, KBRA analyzed DriveTime’s static pool data, and the underlying collateral pool using stressed cash flow assumptions. KBRA considered its operational review of DriveTime, which was conducted at its Tempe, AZ headquarters, as well as several business updates with the Company since that time. Operative agreements and legal opinions will be reviewed prior to closing.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
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