DBRS Morningstar Assigns Ratings to Lendmark Funding Trust 2021-A

DBRS, Inc. (DBRS Morningstar) assigned ratings to the notes issued by Lendmark Funding Trust 2021-A (or the Issuer) as follows:

-- Group I-A Advances at A (sf)
-- Group I-B Advances at BBB (sf)

The ratings are based on DBRS Morningstar’s review of the following analytical considerations:

-- The transaction’s assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: January 2021 Update,” published on January 28, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on January 28, 2021, and are reflected in DBRS Morningstar’s rating analysis. The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for the current ratings. The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.
-- The transaction assumptions also take into consideration observed performance during the 2008–09 financial crisis, improved performance resulting from the sponsor’s adjusted underwriting standards during the coronavirus pandemic and the possible impact of fiscal stimulus.
-- The transaction’s capital structure and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, subordination, amounts held in the reserve fund, and excess spread. Credit enhancement levels are sufficient to support DBRS Morningstar’s stressed projected finance yield, principal payment rate, and charge-off assumptions under various stress scenarios.
-- 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.
-- The capabilities of Lendmark Financial Services, LLC (Lendmark) with regard to originations, underwriting, and servicing.
-- DBRS Morningstar has performed an operational review of Lendmark and considers the entity to be an acceptable originator and servicer of unsecured personal loans with an acceptable back-up servicer.
-- Lendmark’s senior management team has considerable experience and a successful track record within the consumer loan industry.
-- The credit quality of the collateral and performance of Lendmark’s consumer loan portfolio. DBRS Morningstar 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 for assets such as credit card master trusts.
-- The legal structure and presence of legal opinions that will address the true sale of the assets to the Issuer, the nonconsolidation 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 Morningstar “Legal Criteria for U.S. Structured Finance.”

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

This rating action was determined prior to the publication of the ESG Criteria used within the DBRS Morningstar framework.

Notes:
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” (November 6, 2020) and “Rating U.S. Credit Card Asset-Backed Securities” (August 7, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

Each of the principal asset class methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision, Specifically, Rating U.S. Structured Finance Transactions – Appendix I: U.S. Consumer Loan ABS Transactions (November 6, 2020) and Rating U.S. Credit Card Asset-Backed Securities (August 7, 2020).

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: Christopher O'Connell, Senior Vice President, U.S. ABS
Rating Committee Chair: Chris D'Onofrio, Managing Director
Initial Rating Date: January 28, 2021

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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Rating U.S. Structured Finance Transactions – Appendix I: U.S. Consumer Loan ABS Transactions (November 6, 2020) https://www.dbrsmorningstar.com/research/369782/rating-us-structured-finance-transactions

Rating U.S. Credit Card Asset-Backed Securities (August 7, 2020) https://www.dbrsmorningstar.com/research/365459/rating-us-credit-card-asset-backed-securities