NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four categories of notes issued by Marlette Funding Trust 2020-2 (“MFT 2020-2”), a consumer loan ABS transaction of 275.36 million dollars.
The preliminary ratings reflect initial credit enhancement levels of 55.48% for Class A Notes to 13.68% for Class D Notes. Credit Enhancement consists of overcollateralisation, subordination ( in the case of Class A, Class B and Class C Notes), a funded reserve account at closing and excess margin.
Loans from the collateral pool are issued by Cross River Bank. As of the statistical deadline, MFT 2020-2 borrowers have a weighted average interest rate and a weighted average FICO score of 13.25% and 724, respectively. The guarantee pool has a weighted average initial term of 47 months, reflecting a weighted average provisioning period of 4 months.
The financial impact of COVID-19 has resulted in an economic downturn and high unemployment, which can negatively impact the performance of the transaction and unsecured consumer loans in general. Due to this risk, KBRA has increased its benchmark default assumptions for the pool in question in a manner consistent with recent industry portfolio reviews. A review in April resulted in a number of ratings of seven MFT securitizations placed on Watch Developing or Downgrade. Since then, credit enhancement has increased for all of these securities and the underlying collateral has shown improved performance as the number of bad borrowers has declined. As a result, the Class B rating for MFT 2018-4 was recently withdrawn from Watch Developing and confirmed, and five other previous MFT securitization ratings were also confirmed. For more information on reviews, see U.S. Unsecured Consumer ABS Ratings Maintain Watch Report and Surveillance Report on Consumer Unsecured ABS Securities in the United States.
Founded in 2013 in Wilmington, DE, Marlette Funding, LLC (“Marlette”) operates an online market lending platform, which offers personal installment loans under the Best Egg brand (www.BestEgg.com) (the “Marlette Best Egg Platform” or the “Platform”) which are included in this securitization. This operation is the 14e securitization sponsored by Marlette. The first multi-seller securitization issued by Marlette Funding Trust (“MFT”) took place in August 2016. As part of the multi-seller securitization program, Marlette is the sponsor and the guarantee is provided by Marlette and the loan buyers integers from the platform. . All of MFT’s previous securitizations have been rated by KBRA.
KBRA applied its Global Consumer Loan ABS rating methodology published on November 28, 2017 and its Global Structured Finance Counterparty methodology published on August 8, 2018 as part of its analysis of the underlying collateral pool of the transaction, the capital structure proposed and the historical gross loss of the Marlette platform. The data. KBRA also conducted an operational assessment of the Marlette platform, as well as a review of the legal structure of the transaction and transaction documents. KBRA will also review the operational agreements and legal opinions of the transaction prior to closing.
Further information on key credit considerations, sensitivity analyzes that examine the factors that may affect these credit ratings and how they might lead to an upgrade or downgrade, and ESG factors (where they are a major driver of change in credit rating or rating outlook) can be viewed in the full rating report mentioned above.
A description of all substantially significant sources that were used to prepare the credit rating and information about the method (s) (including significant models and sensitivity analyzes of relevant key rating assumptions, if any) used to determine the credit rating is available in the United States Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further information relating to this rating measure is available in the US Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures can be found at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the United States Securities and Exchange Commission. In addition, KBRA is appointed as the designated rating agency by the Ontario Securities Commission for issuers of asset-backed securities to file a simplified prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider and is a credit rating agency (ARC) certified with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a credit rating agency.