KBRA Assigns Preliminary Ratings to Tricolor Auto Securitization Trust 2021-1
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six classes of notes issued by Tricolor Auto Securitization Trust 2021-1 ("TAST 2021-1"), a subprime auto loan ABS (News - Alert) transaction.
TAST 2021-1 will issue six classes of notes totaling approximately $234.2 million. The transaction includes a three-month prefunding period which could represent up to 15% of the total receivables balance. The preliminary ratings reflect initial credit enhancement levels ranging from 50.00% for the Class A notes to 11.00% for the Class F notes.
This transaction represents the first rated ABS securitization in 2021 for the Tricolor Auto Acceptance, LLC ("Tricolor" or the "Company"). Previously, the Company issued a rated ABS securitization in November 2018 as well as five unrated securitizations from 2013-2020. Founded in 2007, Tricolor is an auto lender and "buy here-pay here" auto finance company that focuses on the underserved Hispanic market. Tricolor serves consumers who are typically unable to obtain financing from traditional lending sources such as credit unions, banks, and captive auto finance companies. The Company's founder and CEO, Daniel Chu, owns 35.5% of the Company, while the remaining 64.5% is owned by high net-worth individuals and family offices. The Company is a wholly-owned indirect subsidiary of Tricolor Holdings, LLC. As of June 15, 2021, Tricolor operated a total of 47 dealerships with 32 located in Texas, 10 in California and one in Nevada. The dealerships in Texas and Nevada operate as Tricolor and California dealerships operate as Ganas Auto Group, which is an affiliated brand of Tricolor. In addition, Tricolor operates seven sub-branded Ganas Ya! dealerships.
KBRA applied its Auto Loan ABS Global Rating Methodology, as well as its Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology as part of its analysis of the transaction's underlying collateral pool, the proposed capital structure and Tricolor's historical static pool data. KBRA considered its operational review of Tricolor, which was conducted in September 2018, as well as periodic update calls with the Company. 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.