Morningstar DBRS Assigns Provisional Credit Ratings to WTH Car Rental ULC, Series 2025-1 Notes

DBRS Limited (Morningstar DBRS) assigned provisional credit ratings to the notes to be issued by WTH Car Rental ULC, as follows:

-- Fixed Rate Asset-Backed Senior Notes, Series 2025-1, Class A (the Class A Notes) at (P) AAA (sf)
-- Fixed Rate Asset-Backed Subordinated Notes, Series 2025-1, Class B (the Class B Notes) at (P) A (sf
-- Fixed Rate Asset-Backed Subordinated Notes, Series 2025-1, Class C (the Class C Notes) at (P) BBB (sf)

CREDIT RATING RATIONALE/DESCRIPTION
The Class A Notes, Class B Notes, and Class C Notes (together, the Notes or the Series 2025-1 Notes) are to be issued by WTH Car Rental ULC on the Expected Closing Date and are backed by a security interest in a fleet of rental vehicles (consisting of new and used automobiles, minivans, sport-utility vehicles, trucks, and/or vans), and vehicle receivables originated in Canada.

The structure has a repayment risk profile whereby a portion of the proceeds from the issuance of the Series 2025-1 Notes on the Expected Closing Date may be used by WTH Car Rental ULC to repay all or a portion of principal on other outstanding series, and the remainder may be used to acquire rental vehicles for the rental fleet. The Series 2025-1 Notes are privately placed term bonds, with monthly payments of interest generally being provided by monthly collections received from rental proceeds earned on the Vehicle Fleet. It is expected that the principal to repay the Notes will be accumulated and paid during the Controlled Amortization Period.

The provisional credit ratings incorporate the following considerations:

Dynamic Credit Enhancement
Credit enhancement (CE) includes (1) overcollateralization (OC) ranging from 17.90% to 34.33% (as a percentage of the Series 2025-1 Notes). OC is based on the Vehicle Fleet composition (Program Vehicles, Vehicle Receivables, or Non-Program Vehicles), as well as the credit ratings of the manufacturers, and (2) subordination provided by the issuance of the Class B Notes and the Class C Notes of 7.00% and 3.00%, respectively (expressed as a percentage of the Series 2025-1 Notes). Of the total CE, 4.75% must be in the form of cash or a letter of credit. Additionally, CE increases based on vehicle disposition and/or mark-to-market test results.

Structural Protections
Clearly defined concentration limits are included for vehicle make, with additional constraints on age and mileage, restricting the composition of the revolving fleet throughout the term of the transaction. If triggered, Early Amortization Events (including nonpayment, breaches of representations and covenants, and insolvency of the transaction parties) will result in the acceleration of the repayment of principal on the Series 2025-1 Notes. Additionally, a vehicle disposition test and a mark-to-market test, if breached, will result in an increase to the required enhancement level.

Experienced Administrator
WTH Funding Limited Partnership has a long successful track record of managing the acquisition and disposition of Rental ULC's Vehicle Fleet through challenging economic cycles. Conservative depreciation rates have historically been applied to Non Program Vehicles, resulting in gains on dispositions. Minimum depreciation rates on Program and Non-Program Vehicles, together with the disposition and a mark-to-market test, ensure that the asset base and/or CE are adjusted conservatively.

Backup Administrator and Liquidation Agent
Structural servicer protections will be included at the outset of the transaction with the appointment of an experienced Liquidation Agent in defi AUTO, LLC (formerly known as Sagent Auto, LLC) and an experienced Backup Administrator in Lord Securities Corporation. These third-party entities will be engaged at the closing of this transaction and their fees were included in the stress testing.

Morningstar DBRS' credit ratings on the Series 2025-1 Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are Class A Interest Amount, Class A Controlled Deposit Amount, Class A Principal Balance, Class B Interest Amount, Class B Controlled Deposit Amount, Class B Principal Balance, Class C Interest Amount, Class C Controlled Deposit Amount, and Class C Principal Balance.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating Canadian Rental Car Fleet Securitizations (September 25, 2024), https://dbrs.morningstar.com/research/439990.

Other methodologies referenced in this transaction are listed at the end of this press release.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

A provisional credit rating is not a final credit ratings with respect to the above-mentioned Series 2025-1 Notes and may change or be different than the final credit ratings assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned Notes is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Operational Risk Assessments for Canadian Structured Finance (March 28, 2025), https://dbrs.morningstar.com/research/450831
-- Legal and Derivatives Criteria for Canadian Structured Finance (August 12, 2024), https://dbrs.morningstar.com/research/437761

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/410863.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.