KBRA Assigns Preliminary Ratings to Pagaya AI Debt Trust 2023-1

NEW YORK--(BUSINESS WIRE)--#KBRA--KBRA assigns preliminary ratings to three classes of notes issued by Pagaya AI Debt Trust 2023-1 (“PAID 2023-1”), a consumer loan ABS transaction.

Pagaya Structured Products LLC is a 100% owned subsidiary of Pagaya US Holding Company LLC (formerly known as Pagaya Investments US LLC), which is a 100% owned subsidiary of Pagaya Technologies Ltd. (“Pagaya Technologies”), an Israeli corporation. Pagaya Technologies is a financial technology company in the lending marketplace that uses machine learning, big data analytics, and AI-driven credit and analysis technology. This transaction is the seventh publicly rated securitization sponsored by Pagaya Structured Products LLC (collectively with its affiliates, “Pagaya” or the “Company”). Previously, Pagaya US Holding Company LLC served as sponsor for 16 securitizations of unsecured consumer assets. Overall, Pagaya has completed 32 securitizations for over $13 billion since 2018 with 23 collateralized by unsecured consumer assets, seven securitizations collateralized by auto loan receivables, and two securitizations collateralized by a loan backed by single family rental properties.

PAID 2023-1 has initial credit enhancement levels of 42.00% for the Class A notes and 25.30% for the Class B notes and 2.00% for Class C notes. Credit enhancement is comprised of overcollateralization, subordination of junior note classes, a cash reserve account, and excess spread.

PAID 2023-1 will issue three classes of notes totaling to $500.0 million. Pagaya is premarketing both structures and will decide which it will issue depending on market conditions. The proceeds from the sale of the notes and collections will be used to fund: (i) the prefunding account; (ii) the reserve account; and (iii) pay certain transaction expenses. PAID 2023-1 is a fully prefunded transaction where there is no collateral funded at closing and the notes are initially supported by amounts deposited in the prefunding account. During the three-month prefunding period, the amounts on deposit in the prefunding account will be used to purchase unsecured consumer loans, subject to eligibility criteria and concentration limits, from the following MPL platforms: LendingClub Bank, National Association (“LendingClub”); MF Consumer Loan Trust (“Marlette”); Prosper Funding LLC (“Prosper”); Avant, LLC (“Avant”); and Upgrade, Inc. (“Upgrade”); SoFi Lending Corp (“SoFi”), and RockLoans Marketplace LLC (“Rocket”) (collectively, the “Platform Sellers”). Loans originated on the SoFi and Rocket Platform will be sold directly to the depositor by Cross River Bank. In addition, Pagaya may direct the Depositor to purchase loans originated through a Platform Seller but which are held by its originating bank, including LendingClub and Cross River Bank (“CRB”). Each Platform Seller or an affiliate of each Platform Seller will act as servicer for the loans originated through its platform. Loans originated by an Originating Bank are serviced by the Originating Bank, the Platform Seller, or an affiliate of the Platform Seller. Loans directed for purchase by Pagaya are originated by or sold through the Platform Sellers with the assistance of proprietary credit technology provided by Pagaya Technologies. This proprietary credit technology is used to assess the credit quality of borrowers or potential borrowers of the Platform Sellers and is based on artificial intelligence and machine learning.

KBRA applied its Consumer Loan ABS Global Rating Methodology, as well as its Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology as part of its analysis of the transaction’s proposed capital structure and Pagaya’s historical gross loss data. KBRA considered its operational reviews of Pagaya and each of the Platform Sellers, as well as periodic update calls with the Company and Platform Sellers. KBRA has conducted surveillance on each platform’s recent securitizations. Operative agreements and legal opinions will be reviewed prior to closing.

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

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 Information Disclosure Form(s) 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 Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

Here's another interesting article on Top Trends 2023 - Financial Technology

About KBRA
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. 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.

Contacts

Analytical

Melvin Zhou, CFA, Senior Director (Lead Analyst)
+1 (646) 731-2412
melvin.zhou@kbra.com

Prachi Talathi, Associate Director
+1 (646) 731-1275
prachi.talathi@kbra.com

Juhi Paranjape, Senior Analyst
+1 (646) 731-1252
juhi.paranjape@kbra.com

Eric Neglia, Senior Managing Director (Rating Committee Chair)
+1 (646) 731-2456
eric.neglia@kbra.com

Business Development

Ted Burbage, Managing Director
+1 (646) 731-3325
ted.burbage@kbra.com

First published on Tue, Feb 7, 2023

Enjoyed what you've read so far? Great news - there's more to explore!

Stay up to date with the latest news, a vast collection of tech articles including introductory guides, product reviews, trends and more, thought-provoking interviews, hottest AI blogs and entertaining tech memes.

Plus, get access to branded insights such as informative white papers, intriguing case studies, in-depth reports, enlightening videos and exciting events and webinars from industry-leading global brands.

Dive into TechDogs' treasure trove today and Know Your World of technology!

Disclaimer - Reference to any specific product, software or entity does not constitute an endorsement or recommendation by TechDogs nor should any data or content published be relied upon. The views expressed by TechDogs' members and guests are their own and their appearance on our site does not imply an endorsement of them or any entity they represent. Views and opinions expressed by TechDogs' Authors are those of the Authors and do not necessarily reflect the view of TechDogs or any of its officials. All information / content found on TechDogs' site may not necessarily be reviewed by individuals with the expertise to validate its completeness, accuracy and reliability.

Tags:

KBRA Credit Rating Agency Global Rating Methodology

Join The Discussion

Financial Technology