DBRS Morningstar Finalizes its Provisional Ratings on Donlen Fleet Lease Funding 2 LLC, Series 2021-2

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) to be issued by Donlen Fleet Lease Funding 2 LLC, Series 2021-2 (the Issuer):

-- $125,000,000 Class A-1 Notes at AAA (sf)
-- $764,000,000 Class A-2 Notes at AAA (sf)
-- $25,750,000 Class B Notes at AA (high) (sf)
-- $24,750,000 Class C Notes at A (high) (sf)
-- $24,250,000 Class D Notes at BBB (high) (sf)
-- $36,250,000 Class E Notes at BBB (sf)

The rating on the Notes is based on DBRS Morningstar’s review of the following considerations:

-- DBRS Morningstar has performed an operational review of Donlen and considers the company to be an acceptable originator and servicer of auto fleet leases.

-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
--Credit enhancement levels sufficient to support DBRS Morningstar’s stressed loss assumptions under various stress scenarios.

-- The transaction’s assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on January 28, 2021, and are reflected in DBRS Morningstar’s rating analysis.

-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for the current rating. The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.

-- While the ongoing coronavirus pandemic has had an adverse effect on the U.S. corporate borrower in general, performance of the underlying receivables in this transaction is expected to remain resilient. A diverse group of corporate obligors are making lease payments as well as covering shortfalls in book value at lease end. Furthermore, as auto fleets are typically essential to a company's operations, leases are likely to be affirmed in case of insolvency. Finally, the credit enhancement present in the transaction provides significant coverage of historically minimal losses experienced in auto fleet lease portfolios.

-- The high credit quality and historical performance of the collateral.

-- These leases are “hell or high water” and triple net with no set-off language and lessee responsibility for all taxes/expenses.

-- The legal structure and presence of legal opinions that address the true sale of the assets, the non-consolidation of the Issuer with Donlen, the Issuer’s valid first-priority security interest in the assets, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance” methodology.

CREDIT ENHANCEMENT
The Class A credit enhancement is 14.10% of the Series 2021-2 Required Asset Amount and consists of subordination (10.82%, as a percentage of the Series 2021-2 Required Asset Amount), overcollateralization (OC; 2.56%), and an initial cash reserve (0.73%). The Class B credit enhancement is 11.60% and consists of subordination (8.31%), OC (2.56%), and an initial cash reserve (0.73%). The Class C credit enhancement is 9.18% and consists of subordination (5.90%), OC (2.56%), and an initial cash reserve (0.73%). The Class D credit enhancement is 6.82% and consists of subordination (3.53%), OC (2.56%), and an initial cash reserve (0.73%). The Class E credit enhancement is 3.29% and consists of OC (2.56%) and an initial cash reserve (0.73%). The cash reserve account amortizes to a floor equal to half of the initial amount.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating U.S. Auto Fleet Lease Securitizations (September 23, 2020, https://www.dbrsmorningstar.com/research/367023), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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