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KBRA Assigns Preliminary Ratings to Marlette Funding Trust 2020-2

KBRA Assigns Preliminary Ratings to Marlette Funding Trust 2020-2

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Marlette Funding Trust 2020-2 (“MFT 2020-2”), a $275.36 million consumer loan ABS transaction.

KBRA Assigns Preliminary Ratings to Marlette Funding Trust 2020-2

The preliminary ratings reflect initial credit enhancement levels of 55.48% for the Class A Notes to 13.68% for the Class D Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A, Class B, and Class C Notes) a reserve account funded at closing, and excess spread.

The loans in the collateral pool are originated by Cross River Bank. As of the statistical cutoff date, borrowers in MFT 2020-2 have a weighted average interest rate and weighted average FICO score of 13.25% and 724, respectively. The collateral pool has a weighted average original term of 47 months, which reflects a weighted average seasoning of 4 months.

The financial impact of COVID-19 has resulted in an economic slowdown and high unemployment, which can adversely impact the performance of the transaction and unsecured consumer loans in general. Owing to this risk, KBRA increased its base case default assumptions for the subject pool in a manner that was consistent with recent portfolio reviews of the sector. A review conducted in April resulted in a number of ratings from seven MFT securitizations being placed on Watch Developing or Downgrade. Since that time, credit enhancement has increased for all of those securities and the underlying collateral demonstrated improved performance as the numbers of impaired borrowers declined. As a result, the rating on Class B for MFT 2018-4 was recently removed from Watch Developing and affirmed, and five other ratings across prior MFT securitizations also received affirmations. For more information on the reviews see U.S. Unsecured Consumer ABS Ratings Maintains Watch Report and U.S. Unsecured Consumer ABS Securities on Watch Report.

Founded in 2013 in Wilmington, DE, Marlette Funding, LLC (“Marlette”) operates an online marketplace lending platform, that offers personal installment loans under the Best Egg brand (www.BestEgg.com) (the “Marlette Best Egg Platform” or the “Platform”) that are included in this securitization. This transaction is the 14th securitization sponsored by Marlette. The first multi-seller securitization issued from Marlette Funding Trust (“MFT”) was in August 2016. Under the multi-seller securitization program, Marlette is the Sponsor and the collateral is contributed from Marlette and whole loan buyers of loans originated through the Platform. All prior MFT securitizations were rated by KBRA.

KBRA applied its Global Consumer Loan ABS Rating Methodology published on November 28, 2017 and Global Structured Finance Counterparty Methodology published on August 8, 2018 as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and the Marlette Platform’s historical gross loss data. KBRA also conducted an operational assessment of the Marlette Platform, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.

Click here to view the report. To access ratings and relevant documents, click here.

Related Publications

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.

KBRA Assigns Preliminary Ratings to Marlette Funding Trust 2020-2

Contacts

Analytical Contacts

Brendan Carter, Director (Lead Analyst)

+1 (646) 731-3315

bcarter@kbra.com

Eric Neglia, Managing Director

+1 (646) 731-2456

eneglia@kbra.com

Michael Pettigrew, Analyst

+1 (646) 731-1208

mpettigrew@kbra.com

Rosemary Kelley, Senior Managing Director (Rating Committee Chair)

+1 (646) 731-2337

rkelley@kbra.com

Business Development Contact

Ted Burbage, Managing Director

+1 (646) 731-3325

tburbage@kbra.com