DBRS, Inc. (DBRS) assigned ratings to Lendmark Funding Trust 2018-A (the Issuer) as follows:
-- Series 2018-A Class A Advance, rated AA (sf)
-- Series 2018-A Class B Advance, rated A (sf)
-- Series 2018-A Class C Advance, rated BBB (sf)
The Series 2018-A transaction is a warehouse for the financing of consumer loan receivables.
The ratings are based upon a review by DBRS of the following analytical considerations:
-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the payment of timely interest on a monthly basis and principal by the stated legal maturity date.
-- Lendmark Financial Services LLC’s (Lendmark) capabilities with regard to originations, underwriting and servicing.
-- The credit quality of the collateral and performance of Lendmark’s consumer loan portfolio. DBRS has used a hybrid approach in analyzing the Lendmark portfolio that incorporates elements of static pool analysis employed for assets, such as consumer loans and revolving asset analysis, employed for such assets as credit card master trusts.
-- DBRS applied a finance yield haircut of 8.0%, 6.0% and 4.0% for the Class A, Class B and Class C Advances, respectively. While this haircut is lower than the range described in the “Rating U.S. Credit Card Asset-Backed Securities” methodology, the fixed-rate nature of the underlying loans, lack of interchange fees and historical yield consistency support these stressed assumptions.
-- DBRS applied charge-off multiples of 3.75 times (x) for the Class A Advance, 3.20x for the Class B Advance and 2.50x for the Class C Advance.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with Lendmark, that the trust has a valid first-priority security interest in the assets and is consistent with the DBRS methodology “Legal Criteria for U.S. Structured Finance.”
The principal methodologies are Rating U.S. Structured Finance Transactions – Consumer Loan Appendix and Rating U.S. Credit Card Asset-Backed Securities, which can be found on dbrs.com under Methodologies.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
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