KBRA Assigns Preliminary Ratings to Theorem Funding Trust 2020-1

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three class of notes issued by Theorem Funding Trust 2020-1 (“THRM 2020-1”), a $255.0 million consumer loan ABS transaction.

The preliminary ratings reflect initial credit enhancement levels of 34.15% for the Class A Notes to 15.50% for the Class C Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A and Class B Notes) a reserve account funded at closing, and excess spread.

THRM 2020-1 is the first securitization for Theorem Partners LLC (“Theorem”). Theorem is a research-driven investment manager that uses data science and machine learning to purchase mainly unsecured personal loans from various marketplace lending platforms. THRM 2020-1 is collateralized by prime unsecured consumer loans whose origination was facilitated by LendingClub Corporation’s proprietary technology platform (“LendingClub Platform”). This transaction is backed solely by cash flows from loans whose origination has been facilitated by the LendingClub Platform under its “prime” program.

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. 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.

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 Theorem’s historical gross loss data. KBRA also conducted an operational assessment of Theorem 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

• Theorem Funding Trust 2020-1 KCAT
• Global Consumer Loan ABS Rating Methodology
• Global Structured Finance Counterparty Methodology

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.

Contacts

Analytical Contacts
William Carson, Senior Director (Lead Analyst)

+1 (646) 731-2405

wcarson@kbra.com

Pritam Patel, Associate

+1 (646) 731-3374

ppatel@kbra.com

Abby Barkwell, Director

+1 (646) 731-3304

abarkwell@kbra.com

Eric Neglia, Managing Director (Rating Committee Chair)

+1 (646) 731-2456

eneglia@kbra.com

Business Development Contact
Ted Burbage, Managing Director

+1 (646) 731-3325

tburbage@kbra.com