DBRS Morningstar Confirms Rating on LFS 2020A, LLC

DBRS, Inc. (DBRS Morningstar) confirmed its rating on the following class of security issued by LFS 2020A, LLC:

-- Fixed Rate Asset Backed Notes at A (sf)

The rating action is based 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: March 2021 Update,” published on March 17, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on March 17, 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 current ratings. The moderate scenario remains predicated on a more rapid return of confidence and a steady recovery in 2021.

-- While the impact of the coronavirus pandemic has had an adverse effect on the U.S. borrower in general, DBRS Morningstar expects the performance of the underlying receivables in the transaction to remain resilient because litigation funding receivables are underwritten based on the strength of the case to reach a successful resolution rather than the plaintiff's ability to repay.

-- While the coronavirus pandemic has slowed many court systems throughout the U.S., many cases are settled out of court. DBRS Morningstar stressed the transaction cash flow using various payment and default timing vectors to assess the impact from changes in payment streams. Also, DBRS Morningstar stressed monthly payment collections by applying additional haircut stresses to account for potential delays.

-- Insurance companies most often repay the advances, and many of them carry strong ratings. While there is exposure to the insurance industry in this transaction, DBRS Morningstar does not expect the economic stress caused by the coronavirus to adversely affect the insurance carrier's ability to pay in the short to medium term.

-- Performance of the transaction is within expectations. The credit enhancement level is sufficient to support the DBRS Morningstar-expected default and loss severity assumptions under various stress scenarios. Credit enhancement is in the form of overcollateralization and a liquidity reserve.

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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