Prestige Auto Receivables Trust 2020-1 · 2020. 10. 8. · Presale: Prestige Auto Receivables Trust...

Presale:

Prestige Auto Receivables Trust 2020-1October 8, 2020

Preliminary Ratings

Class Preliminary rating Type Interest ratePreliminary amount (mil.

$)(i)Legal finalmaturity

A-1 A-1+ (sf) Senior Fixed 50.500 Oct. 15, 2021

A-2 AAA (sf) Senior Fixed 154.520 Feb. 15, 2024

B AA (sf) Subordinate Fixed 47.380 Oct. 15, 2024

C A (sf) Subordinate Fixed 60.480 Nov. 16, 2026

D BBB (sf) Subordinate Fixed 28.220 Nov 16, 2026

E BB- (sf) Subordinate Fixed 35.890 Feb. 15, 2028

Note: This presale report is based on information as of Oct. 8, 2020. The ratings shown are preliminary. Subsequent information may result inthe assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed asevidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)The actual size of these trancheswill be determined on the pricing date.

Profile

Expected closing date Oct. 22, 2020.

Collateral Subprime auto loan receivables.

Issuer Prestige Auto Receivables Trust 2020-1.

Contributor, sponsor, servicer, andcustodian

Prestige Financial Services Inc., a Utah corporation.

Depositor Prestige Receivables Corp. II, a special-purpose corporation established underthe laws of Delaware.

Indenture trustee and backup servicer Citibank N.A. (A+/Stable/A-1).

Owner trustee Wells Fargo Delaware Trust Co. N.A.

Structuring lead manager Wells Fargo Securities LLC.

Presale:

Prestige Auto Receivables Trust 2020-1October 8, 2020

PRIMARY CREDIT ANALYST

Zarif Ahmed

New York

(1) 212-438-6690

[email protected]

SECONDARY CONTACT

Kenneth D Martens

New York

(1) 212-438-7327

[email protected]

www.standardandpoors.com October 8, 2020 1

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimeron the last page.

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mailto: [email protected]: [email protected]: [email protected]: [email protected]

Credit Enhancement Summary

Prestige Auto Receivables Trust

2020-1 2019-1 2018-1 2017-1 2016-2 2016-1 2015-1

Preliminary rating

Class A AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf)

Class B AA (sf) AA (sf) AA (sf) AA (sf) AA (sf) AA (sf) AA (sf)

Class C A (sf) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf)

Class D BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf)

Class E BB- (sf) BB (sf) BB (sf) BB (sf) BB (sf) BB (sf) BB (sf)

Subordination (% of the initial receivables)

AAA 42.65 34.95 35.75 34.10 34.50 30.70 28.50

AA 30.90 24.50 26.75 24.10 25.50 22.90 21.50

A 15.90 12.50 14.00 11.80 12.50 11.40 11.00

BBB 8.90 2.65 4.25 3.15 2.25 3.60 2.00

BB N/A N/A N/A N/A N/A N/A N/A

Overcollateralization

Initial (% of theinitialreceivables)

6.50 6.75 6.75 6.50 7.00 4.50 3.50

Target (% of thecurrentreceivables)

18.50 +2.00% (ii)

15.60 14.50 12.90 13.10 13.15 8.50

Floor (% of theinitial andprefundedreceivables)

2.00 2.00 2.00 2.00 2.00 2.00 1.50

Reserve account

Initial (% of theinitialreceivables)

1.00 1.00 1.00 1.00 1.00 1.00 1.00

Target (% of thecurrentreceivables)

1.00 1.00 1.00 1.00 1.00 1.00 1.00

Floor (% of theinitial andprefundedreceivables)

1.00 1.00 1.00 1.00 1.00 1.00 1.00

Total initial hard credit enhancement (% of the initial receivables)

Class A 50.15 42.70 43.50 41.60 42.50 36.20 33.00

Class B 38.40 32.25 34.50 31.60 33.50 28.40 26.00

Class C 23.40 20.25 21.75 19.30 20.50 16.90 15.50

Class D 16.40 10.40 12.00 10.65 10.25 9.10 6.50

Class E 7.50 7.75 7.75 7.50 8.00 5.50 4.50



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Presale: Prestige Auto Receivables Trust 2020-1

Credit Enhancement Summary (cont.)

Prestige Auto Receivables Trust

2020-1 2019-1 2018-1 2017-1 2016-2 2016-1 2015-1

Excess spread peryear (%)(estimated)(i)

13.69 13.31 12.04 12.70 12.82 11.66 13.30

Original expectedloss range (%)

18.25-19.25 13.25-14.00 13.00-13.75 13.00-13.75 13.00-13.75 12.25-12.75 11.25-11.75

Revised expectedloss range (%)

N/A 18.75-19.75 15.25-16.00 13.75-14.25 16.70-17.00 16.70-17.10 14.00-14.50

(i)The excess spread calculations are based on a servicing fee of 2.75%. (ii)18.50% of current pool balance plus 2.00% of initial pool balance.N/A--Not applicable.

Rationale

The preliminary ratings assigned to Prestige Auto Receivables Trust 2020-1's (PART 2020-1)$376.99 million automobile receivables-backed notes series 2020-1 reflect our view of:

- The availability of approximately 55.42%, 48.32%, 38.79%, 33.81%, and 26.08% of creditsupport for the class A, B, C, D, and E notes, respectively (based on stressed cash-flowscenarios, including excess spread), which provide coverage of more than 2.90x, 2.50x, 1.95x,1.65x, and 1.33x our 18.25%-19.25% expected cumulative net loss range for the class A, B, C, D,and E notes, respectively. These credit support levels are commensurate with the assignedpreliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)' and 'BB- (sf)' ratings on the class A, B, C, D, andE notes (for more information, see the S&P Global Ratings' Expected Loss and Cash FlowModeling sections below).

- Our expectation that under a moderate ('BBB') stress scenario, all else being equal, ourpreliminary ratings are consistent with the credit stability limits specified by section A.4 of theAppendix contained in our article, "S&P Global Ratings Definitions," published Aug. 7, 2020.

- The credit enhancement in the form of subordination, overcollateralization, a reserve account,and excess spread (for more information, see the Credit Enhancement Summary table above).

- The timely interest and ultimate principal payments made under the stressed cash flowmodeling scenarios, which are consistent with the assigned preliminary ratings.

- The collateral characteristics of the securitized pool of subprime auto loans.

- Prestige Financial Services Inc.'s (Prestige's) securitization performance history since 2001.

- The transaction's payment and legal structures.

S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of thecoronavirus pandemic. The current consensus among health experts is that COVID-19 will remaina threat until a vaccine or effective treatment becomes widely available, which could be aroundmid-2021. We are using this assumption in assessing the economic and credit implicationsassociated with the pandemic (see our research here: www.spglobal.com/ratings). As thesituation evolves, we will update our assumptions and estimates accordingly.



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Transaction Overview

The PART 2020-1 issuance is Prestige's first securitization in 2020. The series 2019-1 transactionclosed in July 2019. The series 2020-1 transaction is structured as a true sale of the receivables toPrestige Receivables Corp. II (PRC II) from Prestige, the originator. By way of a further true sale,PRC II will sell the assets it acquires to the trust, a bankruptcy-remote special-purpose entity. Thetrust will then pledge its interest in the receivables to the indenture trustee on the noteholders'behalf (see chart 1).

Chart 1

We expect principal and interest payments on the PART 2020-1 notes to begin on Nov. 16, 2020,and subsequent payments to be made on the 15th day or the following business day of eachmonth. The class A, B, C, D, and E notes will each be paid a fixed interest rate and receive principalsequentially, as described in the Transaction Structure section below.



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In rating this transaction, S&P Global Ratings will review the relevant legal matters and opinionsoutlined in its criteria.

Changes From The PART 2019-1 Transaction

The prefunding period for series 2020-1 has increased slightly to four months, compared withthree months for series 2019-1. The credit enhancement summary table shows a comparison ofthe proposed PART 2020-1 credit enhancement to prior PART transactions. The significant creditenhancement changes from the series 2019-1 transaction include the following:

- Hard credit enhancement increased by 745 basis points (bps), 615 bps, 315 bps, and 600 bpsfor classes A, B, C, and D, respectively; for class E, it decreased by 25 bps.

- The target overcollateralization increased to 18.50% of the current pool balance and 2.00% ofthe initial pool balance from 15.60% of the current pool balance previously.

The increased initial hard credit enhancement is primarily because of increased subordinationoffset by a slight decrease in initial overcollateralization. The collateral characteristics are slightlybetter with a greater percentage of Chapter 7 and Chapter 13 bankruptcy collateral (increased to44.21% from 31.80%). Prestige's static pool data indicate that bankruptcy collateral typicallyexhibits lower losses than non-bankruptcy collateral; therefore, we view this change as a positivefrom a credit perspective, and we reflected it in our loss expectation.

We considered the transaction's overall collateral pool mix; the performances of Prestige'sorigination static pools, securitizations, and managed portfolio; peer comparisons; and aforward-looking view of the economy given the measures taken to contain the COVID-19pandemic. As a result, our expected cumulative net loss range for this transaction is18.25%-19.25% (see the S&P Global Ratings' Expected Loss section).

The deal is subject to a prefunding period ending on Jan. 31, 2021, and any collateral prefundedduring that time is subject to certain eligibility parameters. The series 2020-1 parameters, whichapply to the aggregate pool including the prefunded receivables, compared with those of series2019-1 are as follows:

- A weighted average original term of no greater than 70.6 months, which is slightly higher thanthe series 2019-1 parameter of 70.0 months;

- An aggregate amount of bankruptcy collateral of at least 44.50% of the aggregate principalbalance of the pool, an increase from 29.00%;

- A non-zero weighted average obligor credit score (as of the time the related receivables wereoriginated) of at least 533, increased from 532 for the series 2019-1;

- A weighted average original loan amount as a percentage of the wholesale value of the financedvehicle of no more than 133%, which matches the series 2019-1 parameter;

- A weighted average loan payment as a percentage of the obligor's income will be no more than10.50%, which is slightly higher than the 10.02% for the series 2019-1; and

- A weighted average annual percentage rate (APR) of no less than 18.40%, which is down from19.20%.



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Transaction Structure

The PART 2020-1 transaction incorporates the following structural features:

- A sequential payment structure in which the subordinate note classes will providenonamortizing credit enhancement to the senior classes;

- A prefunding account that will be funded with approximately $80.6 million from the sale of thenotes; this amount is approximately 20% of the total collateral balance. The prefunding periodends on Jan. 31, 2021.

- An initial 6.50% overcollateralization amount that will build to a target of 18.50% of the currentpool balance plus 2.00% of the initial pool balance by applying excess spread, subject to a floorof 2.00% of the initial and prefunded pool balance;

- A reserve account that will be funded with an initial deposit of 1.00% of the initial pool balanceand a deposit of 1.00% of subsequent receivables as of the related cutoff dates during theprefunding period. The reserve account will be nondeclining throughout the transaction's life;and

- A mechanism for paying principal to ensure that the senior notes do not exceed the collateralbalance before paying subordinate interest.

Payment Structure

Distributions will be made from the available funds according to a specific priority (see table 1).

Table 1

Payment Waterfall

Priority Payment

1 The indenture trustee and owner trustee fees, and to the owner trustee, the indenture trustee, and the backupservicer, any reasonable indemnities and out-of-pocket expenses (including, without limitation, attorneys' feesand expenses and any conversion fees), provided, however, that such expenses, excluding conversion fees, will belimited to $150,000 and conversion fees will be limited to $30,000.

2 To the servicer, the 2.75% servicing fee and expenses, including the conversion fees of any successor servicerother than the backup servicer, to reimburse the servicer for any unreimbursed servicer advances, and to pay thecustodian expenses permitted under the custodian agreement.

3 Class A note interest.

4 Principal to the extent necessary to reduce the class A note principal balance to the pool balance.

5 The remaining principal balance, paid sequentially, of any outstanding class A notes on their respective finalscheduled distribution date.

6 Class B note interest.

7 Principal to the extent necessary to reduce the combined class A and B note principal balance to the pool balance.

8 The remaining principal balance of any outstanding class B notes on their final scheduled distribution date.

9 Class C note interest.

10 Principal to the extent necessary to reduce the combined class A, B, and C note principal balance to the poolbalance.

11 The remaining principal balance of any outstanding class C notes on their final scheduled distribution date.

12 Class D note interest.



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Table 1

Payment Waterfall (cont.)

Priority Payment

13 Principal to the extent necessary to reduce the combined class A, B, C, and D note principal balance to the poolbalance.

14 The remaining principal balance of any outstanding class D notes on their final scheduled distribution date.

15 Class E note interest.

16 Principal to the extent necessary to reduce the combined class A, B, C, D, and E note principal balance to the poolbalance.

17 The remaining principal balance of any outstanding class E notes on their final scheduled distribution date.

18 To the reserve account, the amount necessary to reach the required level.

19 To the noteholders, the regular principal distributable amount.

20 To the owner trustee, indenture trustee, and backup servicer, any fees and expenses due that are in excess of therelated cap on each.

21 To any successor servicer, the additional servicing compensation, if applicable.

22 Any remaining amounts to the certificateholder.

The above payment priorities may change if a credit event of default (namely, a failure to payinterest on the controlling note class, a failure to pay principal at final maturity, or the trust'sbankruptcy) or a non-credit event of default (namely, a material breach of a representation,warranty, or covenant) occurs and persists.

The indenture trustee may accelerate the notes and will do so if directed in writing by noteholdersholding a majority of the outstanding amount of the controlling note class. The trust estate mayalso be liquidated, but only if a credit event of default occurs, if noteholders holding a majority ofthe outstanding amount of the controlling note class consent, and one of the following occurs:

- The sale or liquidation proceeds are sufficient to ensure all noteholders are paid in full;

- All noteholders consent to the sale; or

- The indenture trustee determines that the trust estate will not provide sufficient funds to paythe noteholders in full on an ongoing basis and obtains the consent to the sale from two-thirdsof the principal amount of the outstanding notes.

If the notes are accelerated following a non-credit event of default, then distributions will be madefrom the available funds according to the payment priority shown in table 1. However, there will beno cap on expenses and indemnities in item 1 of the waterfall, and payment of the regularprincipal distributable amount in item 19 will include all available funds until the total notebalance has been reduced to zero.

If the notes are accelerated following a credit event of default, or if the trust estate is soldfollowing the exercise of remedies after a credit event of default, then distributions will be madefrom the available funds according to the following payment priority (see table 2).



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Table 2

Credit Event Of Default Payment Waterfall

Priority Payment

1 To the trustees, any trustee fees and expenses as well as any expenses owed to the backupservicer without cap.

2 To the servicer, any servicing fee and expenses as well as any expenses owed to the custodian.

3 Class A note interest pari passu among the class A-1 and A-2 notes.

4 To class A-1 noteholders, principal until class A-1 is paid in full.

5 To class A-2 principal until class A-2 is paid in full.

6 Class B note interest.

7 To class B noteholders, principal until class B is paid in full.

8 Class C note interest.

9 To class C noteholders, principal until class C is paid in full.

10 Class D note interest.

11 To class D noteholders, principal until class D is paid in full.

12 Class E note interest.

13 To class E noteholders, principal until class E is paid in full.

14 To any successor servicer, the additional servicing compensation, if applicable.

15 Any remaining amounts to the certificateholder.

Securitization Performance/Surveillance

Prestige issued six bond-insured securitizations from 2001-2007, all of which have paid off. Fivesenior-sub transactions--series 2009-1, 2011-1, 2012-1, 2013-1, 2014-1, and 2015-1--have alsopaid off.

According to our calculations, the paid-off cumulative net losses for the 2001-2015 pools rangefrom 5.88% for the series 2004-1 pool to 15.82% for the series 2007-1 pool (see chart 2). Theseries 2007-1 pool experienced the highest cumulative net losses, which we attribute to not onlythe effects of the recession, but also the pool's low percentage of bankruptcy collateral (13.1%)compared with the other paid-off pools.



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Chart 2 Chart 3

Prestige currently has five outstanding securitizations: series 2016-1, 2016-2, 2017-1, 2018-1,and 2019-1. All outstanding pools are performing worse than our initial expectations.

Table 3

Performance Data For Outstanding Prestige Auto Receivables Trust Transactions

Transaction/series Month

Poolfactor

(%) CNL (%)60-plus-day

delinquency (%)Initial lifetime CNL

% projectionRevised expected

lifetime CNL(i)

2016-1 54 10.77 16.45 3.23 12.25-12.75 16.70-17.10

2016-2 47 18.21 15.11 2.80 13.00-13.75 16.70-17.00

2017-1 37 26.86 11.00 2.48 13.00-13.75 13.75-14.25

2018-1 24 46.83 7.60 2.11 13.00-13.75 15.25-16.00

2019-1 14 68.16 4.23 1.56 13.25-14.00 18.75-19.75(ii)

(i)Expected lifetime CNLs for series 2016-1, 2016-2, 2017-1, and 2018-1 were revised in February 2020. (ii)Expected lifetime CNL for series2019-1 was revised in September 2020. CNL--Cumulative net loss. N/A--Not applicable.

For more information, see "Six Prestige Auto Receivables Trust 2019-1 Ratings Affirmed; Class ERemoved From CreditWatch Negative," published Sept. 23, 2020, and "Twelve Prestige AutoReceivables Trust Ratings Raised, Four Affirmed On Four Transactions," published Feb. 28, 2020.

Managed Portfolio

As of June 30, 2020, Prestige's serviced portfolio was approximately $1,038.0 million, a 8.30%decrease since June 30, 2019. Total delinquencies decreased to 3.50% of the outstanding loanbalance as of June 30, 2020, from 5.40% as of June 30, 2019. Net losses on the other handincreased to 7.18% (annualized) as of June 30, 2020, compared with 6.00% (annualized) as ofJune 30, 2019. Portfolio size had been steadily increasing up until 2018. However, due to recent



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credit tightening measures, there has been a reduction in origination amounts.

Table 4

Managed Portfolio

As of June 30 As of Dec. 31

2020 2019 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Delinquency experience

Portfolio atend of period(mil. $)

1,038.0 1,131.9 1,127.2 1,105.7 1,083.3 1,094.4 940.7 863.0 728.6 544.0 422.7 416.2 494.7

30-plus-daydelinquenciesas a % of theportfolio

3.5 5.4 6.5 5.6 5.5 5.4 4.6 4.3 3.4 3.2 3.9 5.8 6.2

For the periodended June 30 For the period ended Dec. 31

2020 2019 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Loan loss experience

Avg.month-endamountoutstandingduring theperiod (mil. $)

1,081.2 1,116.8 1,124.9 1,076.1 1,101.8 1,015.2 892.2 800.3 636.7 470.0 412.5 449.5 561.8

Netcharge-offsas a % of theavg.month-endamountoutstanding

7.2 6.0 7.1 6.5 6.1 4.9 4.4 3.3 2.0 1.9 3.8 5.9 6.6

Static pool performance by segment

The static cumulative net losses by annual vintage on the company's managed portfolio are shownbelow on an aggregate basis (see charts 4 and 5), as well as broken out by bankruptcy andnon-bankruptcy collateral (see charts 6 and 7).

Prestige looks for obligors whose credit history displays a period of good credit followed by aperiod of poor credit, which may include a recent bankruptcy, but who now demonstrate eitherpositive payment behaviors or strong potential to establish such behaviors. The individuals whomPrestige typically finances under its bankruptcy program have generally suffered a life event, suchas medical issues, a layoff, overextension, or a divorce, that caused a temporary financial setbackleading to the bankruptcy filing. In our view, Prestige's bankruptcy collateral tends to performbetter than its non-bankruptcy collateral because obligors generally emerge from the U.S.Bankruptcy Code process in the case of Chapter 7 with all or most debts discharged, or in the caseof Chapter 13 with a plan to repay creditors over a period of usually three to five years. Theobligor's credit score will, however, have suffered significantly as a result of the bankruptcy, andtherefore credit will be harder and more expensive to obtain. An additional consideration is that anobligor cannot receive a second discharge in any Chapter 7 bankruptcy petition that is filed withineight years from the date that the first Chapter 7 petition was filed. For Chapter 13 bankruptcy, an



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obligor is not eligible for a discharge if a previous discharge was received under Chapter 7 withinthe prior four-year period, or, if the prior discharge was received under Chapter 13, within the priortwo-year period. As a result, the obligor is usually eager to re-establish creditworthiness bydemonstrating good payment behaviors going forward.

Chart 4 Chart 5

Chart 6 Chart 7



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Pool Analysis

As of the initial cutoff date on Sept. 30, 2020, the collateral pool consisted of approximately$322.55 million in auto loans. Collateral up to a value of approximately $80.64 million can beadded during the prefunding period, which will end on Jan. 31, 2021. As mentioned in the ChangesFrom The PART 2019-1 Transaction section above, the final aggregate pool, comprising theprefunded collateral and the statistical pool, must comply with certain eligibility requirements,which we account for in our expected loss.

Table 5

Collateral Comparison

Prestige AutoReceivables

Trust Prestige Auto Receivables Trust

2020-1(i) 2019-1(i) 2018-1 2017-1 2016-2 2016-1 2015-1 2014-1

Receivables balance(mil. $)

322.6 313.4 437.3 358.5 369.5 326.8 414.5 396.4

No. of receivables 18,507 16,491 26,743 23,383 22,350 18,736 24,537 23,461

Avg. original loanbalance ($)

17,429 19,504 18,522 17,440 16,531 17,883 18,900 17,971

Weighted avg. PTI (%) 10.3 9.9 10.1 10.4 11.0 11.0 10.8 10.9

Weighted avg. APR(%)

18.5 19.3 18.8 18.6 18.5 18.3 18.3 18.7

Weighted avg.original term (mos.)

70 70 70 70 70 70 70 70

Weighted avg.remaining term(mos.)

61 66 64 64 66 67 65 65

Weighted avg.seasoning (mos.)

9 4 6 6 4 4 5 5

Original term greaterthan 60 mos. (%)

94.2 91.9 92.1 92.6 93.4 92.9 91.0 90.0

Weighted avg. LTV (%) 132.0 132.3 132.4 133.2 133.0 132.7 131.4 131.4

% of new vehicles 11.6 10.8 10.1 8.1 8.6 7.1 8.1 7.8

% of used vehicles 88.4 89.2 89.9 91.9 91.4 92.7 91.9 92.2

Bankruptcyreceivables (%)

44.2 30.2 38.3 47.8 41.7 47.3 50.7 41.4

Vehicle type breakout (%)

Car 54.6 61.1 66.1 72.0 74.6 75.7 76.1 74.1

SUV 34.8 28.1 25.6 22.4 20.0 18.8 18.2 19.2

Van/truck 10.6 10.8 8.3 5.7 5.4 5.5 5.7 6.7

Top three state concentrations (%)

IL=9.4 IL=7.7 IL=7.9 IL=9.1 IL=8.9 IL=10.3 IL=10.5 TX=12.0

OH=7.8 TX=7.0 OH=7.6 AZ=9.0 TX=7.9 TX=7.8 TX=10.4 IL=9.3



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Table 5

Collateral Comparison (cont.)

Prestige AutoReceivables

Trust Prestige Auto Receivables Trust

2020-1(i) 2019-1(i) 2018-1 2017-1 2016-2 2016-1 2015-1 2014-1

IN=7.4 OH=7.0 AZ=6.6 OH=7.0 AZ=7.5 OH=7.2 OH=8.3 OH=7.2

(i)As of the initial cutoff date on June 30, 2019, for series 2019-1 and Sept. 30, 2020, for series 2020-1. All other pool cuts include prefunding,except series 2016-1. PTI--Payment to income. APR--Annual percentage rate. LTV--Loan-to-value. N/A--Not applicable.

S&P Global Ratings' Expected Loss: 18.25-19.25%

To derive the base-case loss for the series 2020-1 transaction, we reviewed the cumulative netloss performance and loss projections for quarterly origination vintage static pools. Additionally,we looked at recent securitization performance. For the quarterly origination vintage projections,we observed that the loss proxies were higher for the 2019 and 2018 vintages compared to the2017 and 2016 vintages. For the securitization data, we observed higher loss projections (atvarying degrees) for the 2016-1, 2016-2, 2017-1, 2018-1, and 2019-1 transactions compared withtheir respective initial loss expectations.

We also considered the series 2020-1 pool's credit quality and compared it with that of Prestige'sprevious pools. We noted that the credit quality of the 2020-1 pool was overall slightly better thanthe 2019-1 pool, driven primarily by the higher proportion of bankruptcy loans. However, the slightincrease in longer term loans (60-plus months) indicate possibilities of more back-ended losses.

Based on our review of the securitization performance, the quarterly origination static pool data,the pool characteristics, and a forward-looking view of the economy given the measures taken tocontain the COVID-19 pandemic, we expect the series 2020-1 transaction to experiencecumulative net losses in the 18.25%-19.25% range.

Cash Flow Modeling

We modeled the transaction to simulate rated stress scenarios appropriate for the assignedpreliminary ratings (see table 6).

Table 6

Cash Flow Assumptions And Results

Class

A B C D E

Preliminary rating AAA (sf) AA (sf) A (sf) BBB (sf) BB (sf)

Cumulative net losstiming(mos.)[front-end]

12/24 12/24/36 12/24/36/48/60 12/24/36/48/60/72 12/24/36/48/60/72

Net loss timing(%)[front-end]

40/60 22/61/16 16/45/26/10/3 15/42/24/10/8/2 14/41/24/9/9/2

Cumulative net losstiming(mos.)[front-end]

12/24 12/24/36 12/24/36/48 12/24/36/48/60/72 12/24/36/48/60/72



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Table 6

Cash Flow Assumptions And Results (cont.)

Net loss timing(%)[back-end]

37/63 20/64/16 12/39/36/13 10/35/32/20/3/1 10/35/30/20/5/3

ABS voluntaryprepayments (%)

Year 1:1.20; year

2: 1.00;year 3:

0.70; year4 and

after: 0.60

Year 1: 1.20;year 2: 1.00;year 3: 0.70;

year 4 andafter: 0.60

Year 1: 1.20; year 2:1.00; year 3: 0.70;

year 4 and after:0.60

Year 1: 1.20; year 2:1.00; year 3: 0.70; year

4 and after: 0.60

Year 1: 1.20; year 2:1.00; year 3: 0.70; year

4 and after: 0.60

Recoveries (%) 35 35 35 35 35

Recovery lag (mos.) 5 5 5 5 5

Servicing fee (%) 2.75 2.75 2.75 2.75 2.75

Weighted avg. APRdrift (bps)

(3) (3) (3) (3) (3)

Approximatebreak-even levels(%)(i)

55.4 48.3 38.7 33.7 26.1

(i)The maximum cumulative net losses on the pool that the transaction can withstand without triggering a payment default on the relevant noteclasses. ABS--Absolute prepayment speed. APR--Annual percentage rate. Bps--Basis points.

For several years, Prestige has used a customer rewards program under which it can reduce aborrower's APR by up to 0.5% for every consecutive three-month period that the borrower makeson-time payments and maintains full-coverage insurance, up to a maximum 2.0% reduction eachyear. The minimum APR allowed under the rewards program is 14.0%, and no borrower who has anAPR less than or equal to 14.0% can qualify for the program. To account for this program in ourstress runs, we modeled a weighted average drift of -3 bps per month based on the monthlyorigination static pool data that Prestige provided to us.

The break-even results show that the preliminary rated class A through E notes arecredit-enhanced to the degree necessary to withstand a stressed net loss level consistent withthe assigned preliminary ratings.

Sensitivity Analysis

In addition to running break-even cash flows, we ran a sensitivity analysis to see howhigher-than-expected losses can affect the preliminary ratings on the notes (see table 7 and chart8).

Table 7

Scenario Analysis Summary

Loss level (%) 30.94

Loss timing (month 12/24/36/48) (%) 20/37/25/19

Voluntary ABS (%) 1.20

Recoveries (%) 35.0

Recovery lag (mos.) 5

Servicing fee (%) 2.75



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Table 7

Scenario Analysis Summary (cont.)

Weighted avg. APR drift (bps) (3)

Haircut to excess spread (%) 10

ABS--Absolute prepayment speed. APR--Annual percentage rate. Bps--Basis points.

Chart 8

Our sensitivity analysis allows us to simulate a moderate, or 'BBB', loss scenario to determine thedegree to which the ratings are susceptible to a negative rating action. Based on this analysis, wehave found that the preliminary ratings are consistent with the credit stability limits specified bysection A.4 of the Appendix contained in our article, "S&P Global Ratings Definitions," publishedAug. 7, 2020.

Money Market Tranche Sizing

The proposed money market tranche (class A-1) has a 12-month legal final maturity date (Oct. 15,2021). To test whether the money market tranche can be repaid by month 12, we ran cash flowsusing assumptions to delay the principal collections during the 12-month time period. Weassumed zero defaults and a zero absolute prepayment speed for our cash flow run, and wechecked that only 11 months of principal collections would be sufficient to pay off the moneymarket tranche.



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Legal Final Maturity

To test the legal final maturity dates set for classes A-2, B, C, and D, we determined the date onwhich the respective notes were fully amortized in a zero-loss, zero-prepayment scenario andthen added three months to the result. Furthermore, in the break-even scenario for eachrespective rating level, we confirmed that there was sufficient credit enhancement both to coverlosses and to repay the related notes in full by legal final maturity. We calculated the legal finalmaturity for class E by adding 72 months (the longest loan term), the approximately four-monthprefunding period, and an additional twelve months to accommodate recoveries and extensions.

Prestige

Prestige was incorporated under the laws of Utah in September 1994, and is one of the entitiesthat constitute the Larry H. Miller Group of Companies (the Miller Group). The Miller Group is agroup of legally separate companies that Mrs. Karen G. Miller, widow of the late Mr. Larry H. Miller,owns, controls, or operates individually and as sole trustee of a certain trust. In addition toPrestige, the Miller Group includes more than 60 automobile dealerships in the western U.S., theNational Basketball Assn.'s Utah Jazz, the Vivint Smart Home Arena, Jordan Commons (a359,000-sq.-ft. office and entertainment complex), more than 15 large movie theater complexes,the Salt Lake Bees baseball team (a member of the Pacific Coast League and Triple A affiliate ofMajor League Baseball's Angels), a radio station, three insurance companies, and numerous otherreal estate and business ventures. At year-end 2019, the Miller Group had an estimated $3.9billion in total assets and an estimated $5.7 billion in total revenues, and it employed more than10,000 people.

Under the guidance of a board of directors, Miller Management Corp. generally oversees thefinancial services-related entities within the Miller Group. Prestige operates under thismanagement umbrella as a stand-alone legal entity with separate operational management.

Prestige is a financial services company specializing in automobile financing. It acquires andservices retail automobile installment purchase contracts secured by either new or used vehiclesthat both Miller Group and non-Miller Group dealerships generate. Prestige's target market iscredit-impaired buyers who have offsetting strengths, such as relatively stable employment,income, and residential history, as well as a history of paying previous credit as agreed.

Related Criteria

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation AndSpecial-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology AndAssumptions, March 8, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating StructuredFinance Securities: Methodology And Assumptions, Jan. 30, 2019

- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017

- Criteria | Structured Finance | General: Methodology: Criteria For Global Structured FinanceTransactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon ANonmonetary EOD, March 2, 2015



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- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk InStructured Finance Transactions, Oct. 9, 2014

- Criteria | Structured Finance | General: Criteria Methodology Applied To Fees, Expenses, AndIndemnifications, July 12, 2012

- General Criteria: Global Investment Criteria For Temporary Investments In TransactionAccounts, May 31, 2012

- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

- Criteria | Structured Finance | ABS: General Methodology And Assumptions For Rating U.S. AutoLoan Securitizations, Jan. 11, 2011

- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28,2009

Related Research

- A Double-Digit Rebound Has Begun, But It's No Time To Celebrate, Oct. 6, 2020

- U.S. Biweekly Economic Roundup: The Coast Is Not Clear For Jobs, Oct. 2, 2020

- The U.S. Economy Reboots, With Obstacles Ahead, Sept. 24, 2020

- Six Prestige Auto Receivables Trust 2019-1 Ratings Affirmed; Class E Removed FromCreditWatch Negative, Sept. 23, 2020

- COVID-19 Is Testing The Resilience Of Global Structured Finance, May 18, 2020

- Twelve Prestige Auto Receivables Trust Ratings Raised, Four Affirmed On Four Transactions,Feb. 28, 2020

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top FiveMacroeconomic Factors, Dec. 16, 2016



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Standard & Poor’s | Research | October 8, 2020 182529740


Research:RationaleTransaction OverviewChanges From The PART 2019-1 TransactionTransaction Structure Payment StructureSecuritization Performance/SurveillanceManaged PortfolioStatic pool performance by segment

Pool Analysis S&P Global Ratings' Expected Loss: 18.25-19.25%Cash Flow ModelingSensitivity Analysis Money Market Tranche SizingLegal Final MaturityPrestigeRelated CriteriaRelated Research

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