DBRS Morningstar Takes Rating Actions on SESAC Finance, LLC, Series 2019-1

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the following classes of securities in SESAC Finance, LLC, Series 2019-1 as follows:

-- Series 2019-1, Class A-1 VFN at BBB (sf)
-- Series 2019-1, Class A-2 Notes at BBB (sf)

DBRS Morningstar based the rating actions on the following analytical considerations:

-- The transaction 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 and adverse macroeconomic scenarios 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.

-- Diversification of revenue channels. Despite weaker revenues in the general licensing and radio revenue channels, Christian Copyright Licensing International (CCLI) and Digital have experienced momentum in revenue growth amid the pandemic. CCLI continued to grow along with the demand for religious music during this period of time, particularly in its streaming format. Increasing demand for streaming has driven subscriber growth across digital platforms, which in turn has resulted in higher revenue from the Digital channel overall.

-- Contained licensing terminations. SESAC has not seen significant cancellations since the pandemic’s onset. Terminations have been in line with historical trends. During the pandemic, SESAC executed several renewals and entered into new deals with several distribution channels.

-- Debt service coverage ratios (DSCRs) and leverage ratios remain in compliance as of the latest quarterly report (Q4 2020).

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
The principal methodology is U.S. ABS General Ratings Methodology (December 2018), 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 not 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.

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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