Mercedes-Benz Auto Trust Reports Servicing Lapses, No Direct Financial Impact

TL;DR

**Mercedes-Benz Auto Trust's servicing missteps are a red flag for operational risk, even if the Notes are currently unaffected.**

AI Summary

The Mercedes-Benz Auto Receivables Trust 2025-1 filed its 10-K for the fiscal year ended December 31, 2025, indicating no material changes in its financial condition or operations, as many standard items were omitted per General Instruction J(1) to Form 10-K. The Trust, a special purpose vehicle, primarily focuses on securitizing auto receivables. Mercedes-Benz Financial Services USA LLC, as the Servicer, reported two material instances of noncompliance with servicing criteria under Item 1122(d)(4)(vii) of Regulation AB. Specifically, the Servicer failed to send a post-repossession notice for one defaulted receivable and a pre-repossession notice for another receivable released from bankruptcy, though both receivables were not part of the assets backing the Notes. The Servicer plans to modify workflow processes, reporting, and provide additional training to address these issues. U.S. Bank Trust Company, National Association, as Indenture Trustee, reported no material noncompliance. The Trust also noted no significant obligors or credit enhancement details to report, and no material legal proceedings directly against the Trust or its assets.

Why It Matters

For investors in Mercedes-Benz Auto Receivables Trust 2025-1, the reported servicing noncompliance, while not directly impacting the Notes' assets, highlights operational risks within Mercedes-Benz Financial Services USA LLC. These issues could signal broader systemic weaknesses in loan administration, potentially affecting future securitizations or the performance of other trusts if not adequately addressed. Competitively, robust servicing is crucial for investor confidence in asset-backed securities, and these lapses could subtly disadvantage Mercedes-Benz's offerings compared to peers with flawless compliance records. Employees involved in servicing will face increased scrutiny and potential workflow changes, while customers with defaulted loans may experience inconsistent communication practices.

Risk Assessment

Risk Level: medium — The risk level is medium due to the reported material instances of noncompliance by Mercedes-Benz Financial Services USA LLC, as Servicer, under Item 1122(d)(4)(vii) of Regulation AB. Specifically, the Servicer failed to send a post-repossession notice for one defaulted receivable and a pre-repossession notice for one bankruptcy-released receivable. While these specific receivables were not part of the assets backing the Notes, these operational failures indicate potential weaknesses in servicing protocols that could, in other circumstances, directly impact the Trust's assets or expose it to regulatory penalties.

Analyst Insight

Investors should closely monitor future filings from Mercedes-Benz Auto Receivables Trusts for evidence of improved servicing compliance and the effectiveness of the stated workflow modifications. Consider scrutinizing the performance of other Mercedes-Benz securitization vehicles for similar operational issues, as these could indicate broader systemic risks within Mercedes-Benz Financial Services USA LLC's servicing operations.

Financial Highlights

debt To Equity

N/A

revenue

N/A

operating Margin

N/A

total Assets

N/A

total Debt

N/A

net Income

N/A

eps

N/A

gross Margin

N/A

cash Position

N/A

revenue Growth

N/A

Key Numbers

• 2 — Material instances of noncompliance (Reported by Mercedes-Benz Financial Services USA LLC as Servicer under Item 1122(d)(4)(vii) of Regulation AB.)
• 1 — Defaulted receivable (Servicer failed to send a post-repossession notice within the required timeframe.)
• 1 — Receivable in bankruptcy (Servicer failed to send a pre-repossession notice after release from bankruptcy.)
• 2025-1 — Trust Series (Identifies the specific Mercedes-Benz Auto Receivables Trust.)
• 2025-12-31 — Fiscal year end date (The period covered by this 10-K filing.)

Key Players & Entities

• Mercedes-Benz Auto Receivables Trust 2025-1 (company) — Issuing Entity
• Mercedes-Benz Financial Services USA LLC (company) — Sponsor and Servicer
• Mercedes-Benz Retail Receivables LLC (company) — Depositor
• U.S. Bank Trust Company, National Association (company) — Indenture Trustee
• Wilmington Trust, National Association (company) — Owner Trustee
• Christian Rottenkolber (person) — Vice President and Chief Financial Officer of Servicer
• Grant Thornton LLP (company) — Independent public accounting firm for Servicer's attestation
• Ernst & Young LLP (company) — Independent public accounting firm for Indenture Trustee's attestation
• SEC (regulator) — Securities and Exchange Commission
• Clayton Fixed Income Services LLC (company) — Asset Representations Reviewer

FAQ

Risk Factors

• Servicing Noncompliance [medium — operational]: The Servicer, Mercedes-Benz Financial Services USA LLC, reported two instances of noncompliance with servicing criteria under Regulation AB. Specifically, a post-repossession notice was not sent for one defaulted receivable, and a pre-repossession notice was not sent for a receivable released from bankruptcy. These failures, while not impacting assets backing the Notes, indicate potential weaknesses in the Servicer's adherence to established protocols.

Industry Context

The auto finance industry relies heavily on securitization to provide liquidity and manage risk. Trusts like Mercedes-Benz Auto Receivables Trust 2025-1 are crucial for this process, enabling lenders to originate more loans by selling existing ones. The industry is subject to evolving regulatory scrutiny, particularly concerning servicing standards and consumer protection.

Regulatory Implications

The two instances of noncompliance with servicing criteria under Regulation AB, though not material to the Notes, highlight potential regulatory risks. Investors will monitor the Servicer's remediation efforts to ensure future compliance and prevent more significant issues that could impact the trust's operations or investor confidence.

What Investors Should Do

1. Monitor Servicer Remediation
2. Review Future Filings for Compliance Trends

Key Dates

• 2025-12-31: Fiscal Year End — Marks the end of the reporting period for the 10-K filing.

Glossary

Special Purpose Vehicle (SPV)

An entity created for a specific, narrow purpose, such as securitizing assets, to isolate financial risk. (Mercedes-Benz Auto Receivables Trust 2025-1 is an SPV designed to securitize auto receivables.)

Regulation AB

SEC regulation governing the registration, reporting, and disclosure requirements for asset-backed securities. (Governs the servicing criteria and reporting standards for the Trust, including Item 1122(d)(4)(vii) related to servicing noncompliance.)

Servicer

The entity responsible for managing and collecting the underlying assets (auto receivables) in a securitization. (Mercedes-Benz Financial Services USA LLC acts as the Servicer for this Trust.)

Indenture Trustee

A trustee appointed to represent the interests of bondholders in a securitization transaction. (U.S. Bank Trust Company, National Association, serves as the Indenture Trustee for the Trust.)

Asset-Backed Notes

Securities issued by a trust that are backed by a pool of assets, such as auto loans. (These are the securities issued by the Mercedes-Benz Auto Receivables Trust 2025-1.)

Year-Over-Year Comparison

This filing indicates no material changes, and many standard sections were omitted per General Instruction J(1), making a direct comparison of key metrics to a prior year's filing impossible based on the provided text. The primary disclosed change relates to two specific instances of noncompliance by the Servicer, which were not present or were not material in prior periods.

Filing Documents

• mbart20251_10k_32026.htm (10-K) — 106KB
• e311_mbart20251.htm (EX-31) — 7KB
• e331_mbenserv23.htm (EX-33) — 65KB
• e332_ubtcintr.htm (EX-33) — 98KB
• e341_mbenserv23.htm (EX-34) — 14KB
• e342_ubtcintr.htm (EX-34) — 9KB
• e351_mbenserv23mbart20251.htm (EX-35) — 5KB
• 0001853620-26-000093.txt ( ) — 305KB

Unresolved

Item 1B. Unresolved Staff Comments. Nothing to report. The following Items have been omitted in accordance with General Instruction J(1) to Form 10-K: Item 1. Business. Item 1A. Risk Factors. Item IC. Cybersecurity. Item 2. Properties. Item 3. Legal Proceedings. Item 4. Mine Safety Disclosures PART II

Other

Item 9B. Other Information. Nothing to report. 1 The following Items have been omitted in accordance with General Instruction J(1) to Form 10-K: Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Item 6. [Reserved] Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Item 8. Financial Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Item 9A. Controls and Procedures. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections PART III The following Items have been omitted in accordance with General Instruction J(1) to Form 10-K: Item 10. Directors, Executive Officers and Corporate Governance. Item 11. Executive Compensation. Item 12. Security Item 13. Certain Relationships and Related Transactions, and Director Independence. Item 14. Principal Accountant Fees and Services. PURSUANT TO GENERAL INSTRUCTION J(2) THE FOLLOWING SUBSTITUTE INFORMATION IS BEING PROVIDED IN THIS REPORT ON FORM 10-K:

(b)

Item 1112(b) of Regulation AB. Significant Obligors of Pool Assets – Financial Information. Nothing to report.

(b)(2)

Item 1114(b)(2) of Regulation AB. Credit Enhancement and Other Support, Except for Certain Derivatives Instruments – Financial Information. Nothing to report.

(b)

Item 1115(b) of Regulation AB. Certain Derivatives Instruments – Financial Information. Nothing to report. Item 1117 of Regulation AB. Legal Proceedings. There are no legal proceedings pending, or any proceedings known to be contemplated by governmental authorities, against the Sponsor, the Depositor, U.S. Bank Trust Company, National Association (the “Indenture Trustee”), Wilmington Trust, National Association (the “Owner Trustee”), the Issuing Entity, or any property thereof, that are material to holders of the Asset Backed Notes issued by the Issuing Entity (the “Notes”), except to the extent set forth below with respect to the Indenture Trustee. 2 The Indenture Trustee has provided the information contained in the following five paragraphs for purposes of compliance with Regulation AB: U.S. Bank National Association (“U.S. Bank”) and other large financial institutions have been sued in their capacity as trustee or successor trustee for certain residential mortgage backed securities ("RMBS") trusts. The complaints, primarily filed by investors or investor groups against U.S. Bank and similar institutions, allege the trustees caused losses to investors as a result of alleged failures by the sponsors, mortgage loan sellers and servicers to comply with the governing agreements for these RMBS trusts. Plaintiffs generally assert causes of action based upon the trustees’ purported failures to enforce repurchase obligations of mortgage loan sellers for alleged breaches of representations and warranties, notify securityholders of purported events of default allegedly caused by breaches of servicing standards by mortgage loan servicers and abide by a heightened standard of care following alleged events of default. U.S. Bank denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of losses to investors, that

(b) below

Item 15(b) below. (b) Exhibits Required by Item 601 of Regulation S-K 4 Exhibit Number Description 1.1 Underwriting Agreement, dated January 14, 2025, among Mercedes-Benz Retail Receivables LLC, Mercedes-Benz Financial Services USA LLC and SG Americas Securities, LLC, SMBC Nikko Securities America, Inc. and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein (included in Exhibit 1.1 to the Form 8-K of the Issuing Entity, as filed with the SEC on January 16, 2025, which is incorporated herein by reference). 3.1 Certificate of Formation of Mercedes-Benz Retail Receivables LLC (included in Exhibit 3.1 to the Registration Statement on Form SF-3 of Mercedes-Benz Retail Receivables LLC, No. 333-266303, as filed with the SEC on July 22, 2022, which is incorporated herein by reference). 3.2 Limited Liability Company Agreement of Mercedes-Benz Retail Receivables LLC (included in Exhibit 3.2 to the Form 8 K/A of Mercedes-Benz Auto Receivables Trust 2022-1 (cik: 0001951118), as filed with the SEC on November 18, 2022, which is incorporated herein by reference). 4.1 Indenture, dated as of January 1, 2025, between the Issuing Entity and U.S. Bank Trust Company, National Association, as indenture trustee (included in Exhibit 4.1 to the Form 8-K of the Issuing Entity, as filed with the SEC on January 27, 2025, which is incorporated herein by reference). 4.2 Amended and Restated Trust Agreement, dated as of January 1, 2025, between Mercedes-Benz Retail Receivables LLC, as depositor, and Wilmington Trust, National Association, as owner trustee (included in Exhibit 4.2 to the Form 8-K of the Issuing Entity, as filed with the SEC on January 27, 2025, which is incorporated herein by reference). 10.1 Sale and Servicing Agreement, dated as of January 1, 2025, among the Issuing Entity, Mercedes-Benz Retail Receivables LLC, and Mercedes-Benz Financial Services USA LLC, as seller and as servicer (included in Exhibit 10.1 to

SIGNATURES

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Mercedes-Benz Auto Receivables Trust 2025-1 (Issuing Entity) By: Mercedes-Benz Financial Services USA LLC (Servicer) By: /s/ Rottenkolber Name: Christian Rottenkolber Title: Vice President and Chief Financial Officer (senior officer in charge of the servicing function for the Servicer) Dated: March 25, 2026 7 EXHIBIT INDEX Exhibit Number Description 1.1 Underwriting Agreement, dated January 14, 2025, among Mercedes-Benz Retail Receivables LLC, Mercedes-Benz Financial Services USA LLC and SG Americas Securities, LLC, SMBC Nikko Securities America, Inc. and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein (included in Exhibit 1.1 to the Form 8-K of the Issuing Entity, as filed with the SEC on January 16, 2025, which is incorporated herein by reference). 3.1 Certificate of Formation of Mercedes-Benz Retail Receivables LLC (included in Exhibit 3.1 to the Registration Statement on Form SF-3 of Mercedes-Benz Retail Receivables LLC, No. 333-266303, as filed with the SEC on July 22, 2022, which is incorporated herein by reference). 3.2 Limited Liability Company Agreement of Mercedes-Benz Retail Receivables LLC (included in Exhibit 3.2 to the Form 8 K/A of the Mercedes-Benz Auto Receivables Trust 2022-1 (cik: 0001951118), as filed with the SEC on November 18, 2022, which is incorporated herein by reference). 4.1 Indenture, dated as of January 1, 2025, between the Issuing Entity and U.S. Bank Trust Company, National Association, as indenture trustee (included in Exhibit 4.1 to the Form 8-K of the Issuing Entity, as filed with the SEC on January 27, 2025, which is incorporated herein by reference). 4.2 Amended and Restated Trust Agreement, dated as of January 1, 2025, betwee

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