KBRA Affirms Issuer Rating for Westlake Services, LLC, Nowlake Technology, LLC, and Nowcom, LLC.

KBRA affirms the Issuer rating of BBB- for Westlake Services, LLC (“Westlake” or “the company”), as well as the BBB- Issuer rating for parent company Nowlake Technology, LLC (“Nowlake” or “the parent company”). KBRA also affirms the BBB- Issuer and Senior Secured Debt ratings for Nowcom, LLC (“Nowcom”). The Outlook for all ratings is Positive.

Key Credit Considerations

Westlake’s rating, as well as those for parent Nowlake and technology company affiliate, Nowcom, remains supported principally by the company’s superior long-term performance track record – notwithstanding some normalization during 2023-2025 – and business franchise, which continues to benefit from a well-developed risk management framework and execution, as well as overall operations. The ratings also continue to be supported by solid relative equity capitalization, supplemented by meaningful credit reserves and dealer discounts, each essential given potential subprime auto asset quality volatility; acknowledging the company’s portfolio increasingly reflects a greater portion of near-prime and prime customer components.

While Westlake remains the principal contributor to parent Nowlake’s revenue and earnings generation and comprises the vast majority of the parent company’s assets and allocated equity, affiliate Nowcom’s dealer client business momentum, revenue, and very high profit margins have been additive to the parent’s operating profile. This growing and highly profitable fee stream, as well as its low capital intensity business model, supports the technology company’s ratings, which remain equalized with the much larger parent company. Some additional fee income diversification has also been generated by Westlake’s third-party servicing business. Given the entities’ close strategic and operational linkages, Nowlake’s and Nowcom’s ratings remain in line with Westlake’s. The lack of parent company debt also supports our equalization of Nowlake’s and Westlake’s ratings.

Notwithstanding Westlake’s market position as a leading auto lender/lessor with a diverse geographic footprint and seasoned management team, the highly competitive industry remains prone to select periods where irrational pricing and/or credit performance volatility can challenge industry returns. In this regard, Westlake’s credit strengths are counterbalanced, in part, by the inherent risks associated with its traditional borrower base, primarily credit, but operational risk as well. Market funding also remains a ratings constraint for non-depository lenders.

Rating Sensitivities

Continued revenue diversification, particularly driven by non-spread sources, and comparatively strong through-the-cycle asset quality could result in a ratings upgrade over the medium term. Conversely, weakening asset quality, a more aggressive risk appetite, or lack of progress diversifying revenues could result in a revision of the Outlook to Stable.

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Methodologies