DBRS Morningstar Finalizes Provisional Ratings on Libra Solutions 2023-1 LLC

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) issued by Libra Solutions 2023-1 LLC (the Issuer):

-- $102,265,000 Class A Fixed Rate Asset Backed Notes at A (low) (sf)
-- $24,756,000 Class B Fixed Rate Asset Backed Notes at BB (sf)

RATING RATIONALE/DESCRIPTION
-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2022 Update,” published on December 21, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.
-- Overcollateralization, subordination, and a fully funded reserve account provide credit enhancement levels that are commensurate with the ratings on the Notes. Credit enhancement levels are sufficient to support DBRS Morningstar-projected expected cash collection 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. The ratings address the payment of timely interest and ultimate principal of the Notes by the Legal Final Payment Date.
-- The full-turbo feature included in the transaction provides further protection for the Notes.
-- Libra Solutions Intermediate Holdco, LLC (Libra) is an experienced originator in the litigation and medical receivable business with an acceptable backup servicer.
-- Advances are most often repaid by insurance companies, many of which carry strong ratings. To assess insurance carrier risk, DBRS Morningstar used its proprietary model, the DBRS CLO Asset Model, to estimate losses at different statistical confidence intervals that correspond to a given rating level.
-- DBRS Morningstar applies stresses to the expected case cash multiples to reflect the variability of cash collections. The stresses are determined based on the originator’s historical variability in collections, which is measured by the coefficient of variation, and translated into haircuts to be applied to the expected case via a lognormal distribution.
-- The credit quality of the collateral is assessed and reflected in the cash flow assumptions.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with Libra, that the trust has a valid first-priority security interest in the assets, and consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental, social, and governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the rating is Rating U.S. Structured Finance Transactions (February 6, 2023); https://www.dbrsmorningstar.com/research/409449/rating-us-structured-finance-transactions.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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.

DBRS, Inc.
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

Operational Risk Assessment for U.S. ABS Servicers (February 6, 2023) https://www.dbrsmorningstar.com/research/409447/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (November 8, 2022) https://www.dbrsmorningstar.com/research/405082/operational-risk-assessment-for-us-abs-originators

Legal Criteria for U.S. Structured Finance (December 7, 2022) https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance

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