KBRA Assigns Preliminary Ratings to Oportun Funding 2020-1, LLC

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes for Oportun Funding 2020-1, LLC (“Oportun 2020-1”), a consumer loan ABS transaction. Oportun 2020-1 will issue four classes of notes totaling $193.65 million that are collateralized by unsecured installment loans.

This transaction, Oportun Funding 2020-1, LLC (“Oportun 2020-1”) represents the Company’s 15th consumer loan ABS securitization and the first in 2020. Unlike previous Oportun securitizations that include a revolving period where additional collateral can be purchased by the trust, Oportun 2020-1 is a non-revolving structure backed by a static pool of unsecured consumer installment loans with a weighted average seasoning of 10 months.

The transaction has initial hard credit enhancement levels ranging from 22.94% for the Class A notes to 5.74% for the Class D notes. The target enhancement levels for the Class A notes and the Class D notes are 28.94% and 11.74%, respectively. Credit enhancement is comprised of overcollateralization, subordination of junior note classes, a reserve account and excess spread.

The financial impact of COVID-19 has resulted in an economic slowdown and high unemployment, which can adversely impact the performance of the subject pool 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. The increase in loss assumptions also incorporated observed increases in gross losses in Oportun’s static pool performance, an analysis of the recent performance of loans enrolled in the Company’s extension program and the performance of these loans when the temporary relief expired.

KBRA applied its Global Consumer Loan ABS Rating Methodology and its Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and Oportun’s historical static pool data. KBRA also conducted an operational assessment on the originator and servicer, 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 Limited is registered with ESMA as a CRA.