KBRA Assigns Preliminary Ratings to LendingPoint 2020-REV1 Asset Securitization Trust
NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by LendingPoint 2020-REV1 Asset Securitization Trust (“LP 2020-REV1”), a consumer loan ABS transaction.
This transaction represents LendingPoint LLC’s (“LendingPoint” or the “Company”) fourth KBRA rated securitization of non-prime unsecured consumer installment loans, and its first rated revolving transaction. Four classes of notes (collectively, the “Notes” or “Series 2020-REV1 Notes”) totaling $328.50 million will be issued with an expected closing date of October 12, 2020. The Series 2020-REV1 Notes are “expandable” term notes such that at any time during the two year revolving period, the Issuer may periodically issue additional Notes, up to a maximum amount of $1 billion, as long as certain conditions are met.
This transaction has initial credit enhancement levels of 54.25% for the Class A Notes, 35.50% for the Class B Notes, 20.50% for the Class C Notes and 10.50% for the Class D Notes. Credit enhancement consists of excess spread, overcollateralization, subordination (in the case of the Class A, B and C Notes) and a reserve account funded at closing.
Founded in July 2014, LendingPoint is a wholly owned subsidiary of LendingPoint Holdings LLC which is a wholly owned subsidiary of LendingPoint Consolidated, Inc. The Company issued its first direct to consumer (“DTC”) loan in 1Q 2015, and through July 31, 2020 has originated over $1.9 billion DTC loans with a current principal outstanding amount of $853 million. LendingPoint currently uses a hybrid origination model for its DTC loans, utilizing its state licenses to originate loans in DE, GA, UT, SD and CO and relationships with two third-party originating banks, FinWise Bank (“FinWise”), a FDIC insured Utah state-chartered bank and First Electronic Bank (“FEB”), a FDIC insured Utah industrial bank, for all other states. LendingPoint maintains licenses or has the right to make consumer loans in 39 states and the District of Columbia. As of the Statistical Cutoff Date, approximately 93.48% of the loans in LP 2020-REV1 were originated by FinWise, with the remaining 6.52% originated by LendingPoint using its state licenses.
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 consumer loans in general. In considering this risk, KBRA applied additional stress scenarios by increasing its expected base case gross charge-off assumptions for this transaction. The assumption increase was derived from KBRA’s analysis of the relationship between the historical unemployment rate and annualized gross loss rates through the 2008-2009 financial crisis for different types of lending products.
KBRA applied its Global Consumer Loan ABS Rating Methodology and Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and LendingPoint’s historical gross loss data. KBRA also conducted an operational assessment of the LendingPoint Program, 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.
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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.
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