DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following notes to be issued by Regional Management Issuance Trust 2019-1 (the Issuer):
-- $108,330,000 Class A Notes at AA (sf)
-- $11,560,000 Class B Notes at A (sf)
-- $10,110,000 Class C Notes at BBB (sf)
The ratings are based on a review by DBRS Morningstar 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 timely payment of interest on a monthly basis and principal by the legal final maturity date.
-- Regional Management Corp.’s (Regional) capabilities with regard to originations, underwriting and servicing.
-- DBRS Morningstar has performed an operational review of Regional and considers the entity to be an acceptable originator and servicer of unsecured personal loans with an acceptable backup servicer.
-- Regional’s senior management team has considerable experience and a successful track record within the consumer loan industry.
-- Regional has remained consistently profitable since 2007.
-- In February 2018, Regional completed a system migration to the Nortridge Loan Management System, allowing for the implementation of centralized underwriting for all branches, which led to the implementation of a hybrid servicing model.
-- The credit quality of the collateral and performance of Regional’s consumer loan portfolio. DBRS Morningstar used a hybrid approach in analyzing Regional’s portfolio which 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.
-- 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 Regional and that the trust has a valid first-priority security interest in the assets and is consistent with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”
Credit enhancement in the transaction consists of overcollateralization (OC), subordination, excess spread and a reserve account. The rating on the Class A Notes reflects the 26.00% of initial hard credit enhancement provided by the subordinated notes in the pool, the reserve account (1.00%) and OC (10.00%). The ratings on the Class B and the Class C Notes reflect 18.00% and 11.00% of initial hard credit enhancement, respectively. Additional credit support may be provided by excess spread available in the structure.
All figures are in U.S. dollars unless otherwise noted.
The principal methodologies are Rating U.S. Structured Finance Transactions – Appendix I: U.S. Consumer Loan ABS Transactions and Rating U.S. Credit Card Asset-Backed Securities, which can be found on dbrs.com under Methodologies & Criteria.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.
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