Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Pagaya AI Debt Selection Trust 2021-3 (“PAID 2021-3”), a consumer loan ABS transaction.
This transaction is the fourth publicly rated securitization for Pagaya Investments US LLC (“Pagaya” or the “Company”) and third in 2021. Pagaya is a 100% owned subsidiary of Pagaya Technologies Ltd., which is an Israeli corporation. The Company is a technology-based asset manager that uses data analytics and artificial intelligence (“AI”) to review and purchase certain unsecured consumer loans from marketplace lending (“MPL”) platforms, originating banks and automobile loans from certain automobile finance companies.
PAID 2021-3 has initial credit enhancement levels of 34.30% for the Class A notes, 23.20% for the Class B notes and 10.50% for the Class C notes. Credit enhancement is comprised of overcollateralization, subordination of junior note classes (except for the Class C notes), a cash reserve account, and excess spread.
PAID 2021-3 is a fully prefunded deal where there is no collateral funded at closing and the notes are initially supported by amounts deposited in the prefunding account. During the 6-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”) (collectively, the “Platform Sellers”). In addition, Pagaya may 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 will act as servicer for the loans originated through its platform.
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.
- Consumer Loan ABS Global Rating Methodology
- Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology
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.
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.
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