Both KBRA and S&P Global Ratings gave updates this week about its ongoing evaluation of securitizations made by Tricolor Holdings, which recently filed for Chapter 7 bankruptcy.

S&P Global Ratings suspended its ratings on six classes of automobile receivables-backed from Tricolor Auto Securitization Trust 2025-2. At the time of suspension, the ratings were on CreditWatch with negative implications.

KBRA downgraded and maintained its watch downgrade placements on all 34 outstanding ratings from seven Tricolor Auto Securitization Trust (TAST) transactions. KBRA said these rating actions reflect the potential missed distribution of funds on the September distribution date and the likelihood of disruptions to collections and noteholder remittances due to the ensuing servicing transfer and resignation of the indenture trustee.

The moves by the ratings agencies surfaced after other subprime auto finance companies like Credit Acceptance also answered questions about its operation following the downfall of Tricolor.

“Today’s rating action reflects our lack of what we regard as sufficient information of satisfactory quality to surveil the transaction in accordance with our criteria,” S&P Global Ratings said in a news release. “Specifically, we have not received the investor report pertaining to the Sept. 15, 2025, distribution date. As such, at this time, we are unable to determine whether the TAST 2025-2 classes of notes received timely payments in accordance with the priority of payment outlined in the transaction documents.

“Additionally, in the absence of the investor report, we are unable to ascertain the performance and credit quality of the collateral pool backing the TAST 2025-2 classes of notes since the previous distribution on Aug. 15, 2025,” S&P Global Ratings continued.

“Our ability to resume providing and maintaining credit ratings on the transaction will depend upon the ongoing timely receipt of what we regard as sufficient information of satisfactory quality,” S&P Global Ratings went on to say.

In its news release, KBRA discussed the involvement of Vervent as the new servicer for Tricolor’s outstanding contracts.

KBRA then elaborated about the complex situation.

“Following Tricolor’s bankruptcy filing, Wilmington Trust, National Association (WTNA), as indenture trustee, provided notice of a servicer termination event for each of the outstanding TAST transactions. Vervent is expected to assume the servicing responsibilities, however their ability to take over Tricolor’s servicing operations is subject to authorization by the related bankruptcy court. On Sept. 19, 2025, the bankruptcy court issued an order authorizing Vervent to access and use funds from the Company’s collection accounts, subject to certain approvals. The order is effective until October 17, 2025 unless extended by the Bankruptcy Court. KBRA has made several attempts to contact representatives of Vervent and was unable to confirm whether the transfer had occurred. As of Sept. 21, 2025, KBRA’s understanding based on media reporting is that the servicing transfer, while expected, has not yet occurred. Involuntary servicing transfers can cause meaningful disruptions in collection activity and may result in decreased recoveries, particularly with respect to subprime borrowers.

“Sept. 15, 2025 was the scheduled September distribution date, the first to occur after the company’s bankruptcy filing. To KBRA’s knowledge, no servicer report was made available and therefore KBRA has no evidence that funds to pay interest or principal were distributed to noteholders. Failure to pay interest to the most senior outstanding class, if uncured for five business days (i.e., as of Sept. 22, 2025), would constitute an event of default pursuant to each transaction’s indenture. Although funds were available in the reserve account to cover interest payments, KBRA was unable to confirm whether payments were made to the noteholders for the September distribution.

“On Sept. 20, 2025, WTNA as indenture trustee and custodian for each transaction provided notice of its resignation as indenture trustee (and, thereby, its termination as Custodian). The resignation of the indenture trustee will become effective upon the acceptance of appointment by a successor indenture trustee pursuant to Sections 2.05(a) and 6.08(e) of the indenture and Sections 3.04(a) and 3.11 of the trust agreement.”