Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to five classes of notes issued by DT Auto Owner Trust 2020-3 (“DTAOT 2020-3”), a $370.13 million auto loan ABS transaction.
This transaction is the third 2020 ABS securitization issued by DriveTime Automotive Group, Inc. (“DriveTime” or the “Company”). Inclusive of the subject transaction, the Company has issued 69 securitizations since 1996 totaling approximately $19.0 billion, of which Kroll Bond Rating Agency (KBRA) has rated 12. 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 58.75% for the Class A notes, to 19.25% for the Class E notes. The target enhancement levels for the Class A notes and Class E notes are 64.00% and 24.50%, 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 increased its base case default assumptions for the subject pool in a manner that was consistent with recent portfolio reviews of the sector that were highlighted in reports published on July 16, 2020 and April 21, 2020. On July 16, 2020, KBRA affirmed the ratings of 13 classes of notes issued from DT Auto Owner Trusts, kept one class on Watch Developing and moved two classes of notes from Watch Downgrade to Watch Developing due to better than expected performance through the current economic slowdown.
KBRA applied its Global Auto Loan ABS methodology and its Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and U.S. Auto’s historical static pool data. KBRA also conducted an operational assessment on the originator and servicer, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.
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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 U.S. Information Disclosure Form 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 U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. 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 and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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