Morningstar DBRS Assigns Provisional Credit Ratings to Crossroads Asset Trust 2025-A

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes (the Notes) to be issued by Crossroads Asset Trust 2025-A:
-- $40,000,000 Class A-1 Notes at (P) R-1 (high) (sf)
-- $146,630,000 Class A-2 Notes at (P) AAA (sf)
-- $18,250,000 Class B Notes at (P) AA (sf)
-- $14,750,000 Class C Notes at (P) A (sf)
-- $18,120,000 Class D Notes at (P) BBB (sf)
-- $10,750,000 Class E Notes at (P) BB (sf)

CREDIT RATING RATIONALE/DESCRIPTION
The provisional credit ratings are based on a review by Morningstar DBRS of the following analytical considerations:

(1) The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns March 2025 Update, published on March 26, 2025. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

(2) The expected cumulative net loss (CNL) assumption considers the deterioration in cumulative gross loss (CGL) for some of the recently originated vintages in conjunction with the volatility in performance data historically exhibited by portfolios concentrated in transportation industry. Furthermore, Morningstar DBRS considered the potential impact of the trade tariffs and other measures recently announced and being implemented by the U.S. governing authorities on collateral performance. While there has been some improvement in asset performance for the 2024 vintage, the sector specific recessionary pressures persist. At the same time, Crossroads has been able to achieve higher recovery rates compared to some of its peers. Morningstar DBRS examined the historical CGL data, which was further adjusted to incorporate the performance of recent vintages and the expectation regarding the length of continuing recession in the transportation sector. Morningstar DBRS applied a haircut (relative to an expected case) recovery rate to determine the CNL assumption. The CNL assumption also takes into consideration a mix in the expected collateral portfolio (including certain limits applied to collateral to be funded during the funding period) of such attributes as risk grade, fleet size, and new / used vehicles.

(3) The transaction's capital structure and form and sufficiency of available credit enhancement. The subordination, OC, cash held in the Reserve Account, available excess spread, and other structural provisions create credit enhancement levels that are commensurate with the respective credit ratings for each class of the Notes. Under various cash flow scenarios, the credit enhancement available to the Transaction can withstand the stressed expected loss using target multiples of 5.15 times (x) , 4.15x, 3.30x, 2.40x, and 1.80x , with respect to the Class A, B, C, D, and E Notes, respectively.
-- The initial OC as of the closing date will be equal to 4.00%, expected to build up to 6.50% of the Securitization Value of the outstanding collateral (subject to a floor equal to 2.00% of Aggregate Securitization Value as of the Initial Cut-Off Date, including initial Securitization Value of collateral to be funded during the funding period).
-- The nondeclining, replenishable cash Reserve Account will be funded at 1.00% of the initial Securitization Value of the collateral pool, including initial Securitization Value of the collateral to be funded during the funding period.
-- The weighted-average (WA) contract rate for the expected collateral pool is approximately 12.03% (with the minimum requirement of 12.00% following the funding period), resulting in a substantial expected excess spread at closing.

(4) Sequential amortization of the Notes; subordination; the nondeclining, replenishable reserve amount; and the OC floor are expected to create credit enhancement for the Notes that increases over time.

(5) Morningstar DBRS' cash flow analysis tested the ability of the transaction to generate cash flows sufficient to service the interest and principal payments on the Notes under four different net loss timing scenarios and during slow (zero conditional prepayment rate (CPR)) and fast (8 CPR) prepayment environments.

(6) The expected amount to be funded during the funding period is limited at 12% of the aggregate Securitization Value, with the risk further mitigated by limits on certain collateral characteristics that will apply during the funding period.

(7) The related financing contracts for the units contributed to collateral pool will be entirely in electronic form. Also, Crossroads installs GPS tracking devices on all trucks and trailers it finances and can block a vehicle once it comes to a stop.

(8) Crossroads is an established originator and servicer of equipment loan and lease contract receivables, which has been operating since 2006. Crossroads managed a portfolio of approximately $839 million in outstanding receivables as of December 31, 2024. Crossroads' financing and syndication partners include such established, large industry participants as Daimler Truck Finance.

(9) Morningstar DBRS performed an operational risk review and deems Crossroads an acceptable originator and servicer of equipment-backed leases and loans. GreatAmerica Portfolio Services Group, LLC, an experienced servicer of equipment-backed collateral, will be the Back-up Servicer for the Transaction.

(10) The expected collateral pool is granular but has approximately 31% (by principal balance) obligor concentration in California. As of the Initial Cut-Off Date, approximately 91% of collateral benefited from personal guarantees. Approximately 15% of collateral had corporate guarantors. In addition, approximately 40%, 9%, 20% and 31% of collateral, respectively, was represented by individual owner-operators (IOO), large fleets, mid-size fleets and small fleets. The Series 2025-A benefits from no exposure to credit tier D obligors, with 41% of obligors assigned credit tier A by Crossroads. New equipment financing represented 53% of collateral as of the Initial Cut-Off Date.

(11) The transaction is supported by an established structure and is consistent with Morningstar DBRS' Legal Criteria for U.S. Structured Finance methodology. Legal opinions covering true sale and nonconsolidation will also be provided.

Morningstar DBRS' credit rating on the securities referenced herein address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Accrued Note Interest and Initial Note 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. For example, the interest on unpaid Noteholders' Interest Carryover Shortfall for each of the rated Notes.

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 US dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating U.S. Equipment Lease and Loan Securitizations (August 06, 2024) https://dbrs.morningstar.com/research/437575.

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

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

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 rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned securities are 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, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

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

Rating U.S. Structured Finance Transactions (March 10, 2025), https://dbrs.morningstar.com/research/449616

Operational Risk Assessment for U.S. ABS Originators and Servicers (March 26, 2025), https://dbrs.morningstar.com/research/450709

Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

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