KBRA Assigns Preliminary Ratings to LAD Auto Receivables Trust 2023-1
KBRA assigns preliminary ratings to six classes of notes issued by LAD Auto Receivables Trust 2023-1 ("LADAR 2023-1"), an auto loan ABS transaction.
LADAR 2023-1 will issue six classes of notes totaling $479.67 million. Credit enhancement on the notes is comprised of overcollateralization ("OC"), yield supplement overcollateralization ("YSOC"), subordination of junior note classes, a cash reserve account, and excess spread.
This transaction is the third ABS securitization for Driveway Finance Corporation ("DFC" or the "Company"). DFC's first two ABS securitizations, LADAR 2022-1 and LADAR 2023-1, were both rated by KBRA. DFC was incorporated in Oregon in September 2012 under the name Southern Cascades Finance Corporation and rebranded as DFC on January 1, 2021. DFC is a wholly owned subsidiary of Lithia Financial Corporation, itself a wholly owned subsidiary of Lithia Motors, Inc. ("Lithia"). DFC has been originating and servicing loans in the automobile finance business since September 2012, initially targeting a subprime borrower base. Since May 2020 the Company has been a full credit spectrum lender, financing vehicles exclusively to Lithia customers through Lithia's dealership network and e-commerce business channels. Lithia was founded as a single automotive dealership in 1946 in Ashland Oregon, was incorporated in 1968, and completed an initial public offering on the New York Stock Exchange in 1996, trading under the ticker "LAD." Today, Lithia is a Fortune 500 company operating 292 dealership locations representing 48 brands across 28 states in the U.S. and three Canadian provinces. Lithia offers an array of products and services including new and used vehicles, insurance, automotive repair and maintenance, and automobile financing through its DFC subsidiary.
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 static pool data and the underlying Collateral pool and stressed the capital structure based upon its stress case cash flow assumptions. KBRA conducted onsite operational reviews of Lithia and DFC at its Tigard, OR location. Operative agreements and legal opinions will be reviewed 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 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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