DBRS Morningstar Takes Rating Actions on Oportun Funding 2022-1, LLC and Oportun Issuance Trust 2022-2

DBRS, Inc. (DBRS Morningstar) confirmed five ratings and downgraded two ratings from Oportun Funding 2022-1, LLC and Oportun Issuance Trust 2022-2 as follows:

Oportun Funding 2022-1, LLC:
-- Class A Notes confirmed at AA (low) (sf)
-- Class B Notes confirmed at A (low) (sf)
-- Class C Notes downgraded to BB (low) (sf) from BBB (low) (sf)

Oportun Issuance Trust 2022-2:
-- Class A Notes confirmed at AA (low) (sf)
-- Class B Notes confirmed at A (low) (sf)
-- Class C Notes confirmed at BBB (low) (sf)
-- Class D Notes downgraded to B (sf) from BB (sf)

The rating actions are based on the following analytical considerations:

--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.

--The collateral performance to date and DBRS Morningstar's assessment of future performance. As of the April 2023 payment date, Oportun Funding 2022-1, LLC and Oportun Issuance Trust 2022-2 have amortized to pool factors of 43.93% and 66.57%, respectively, and to date have current cumulative net losses (CNLs) of 9.00% and 6.77%, respectively. Current CNLs are tracking well above DBRS Morningstar’s initial base-case loss expectations of 8.63% and 10.23%, respectively. While credit enhancement (CE) has increased for all outstanding notes, the CE growth for the subordinate notes has been limited due to the higher CNLs.

-- Because of the weaker-than-expected performance, DBRS Morningstar has revised the base-case loss expectation for Oportun Funding 2022-1, LLC and Oportun Issuance Trust 2022-2 to 17.70% and 19.50%, respectively. As a result, the current level of hard CE and estimated excess spread are insufficient to support the current ratings on the Class C Notes from Oportun Funding 2022-1, LLC and the Class D Notes from Oportun Issuance Trust 2022-2. Consequently, these Classes have been downgraded to a rating level commensurate with the current implied multiple.

-- Oportun Funding 2022-1, LLC has reached the target overcollateralization (OC) level of 12.00% of the outstanding receivables balance. As of the April 2023 payment, Oportun Issuance Trust 2022-2 has a current OC amount of 8.47% relative to the target of 11.50% of the outstanding receivables balance. Additionally, both transactions are structured to include a reserve fund (RF) that has a target of 0.25% of the outstanding receivable balance. Consequently, as the transactions amortize, the RF amount will decline and represent a smaller portion of available CE.

-- For Oportun Funding 2022-1, LLC and Oportun Issuance Trust 2022-2, the transactions provide for Class C Notes and Class D Notes with current ratings of BB (low) (sf) and B (sf), respectively. While the DBRS Morningstar “Rating U.S. Structured Finance Transactions” and “Rating U.S. Credit Card Asset-Backed Securities” methodologies do not set forth a range of multiples for this asset class at the BB (low) (sf) and B (sf) levels, the analytical approach for these rating levels is consistent with that contemplated by the methodologies. The typical range of multiples applied in the DBRS Morningstar stress analysis for BB (low) (sf) and B (sf) ratings is 1.30x to 1.35x and 1.00x to 1.25x, respectively.

-- The transactions include a Cumulative Default Ratio Amortization Event that, if tripped, would cause a lockout of any distributions to the Certificateholders. As of the April 2023 payment date, neither of the transactions have breached the Cumulative Default Ratio Amortization Event.

--The transaction parties’ capabilities with regard to originating, underwriting, and servicing.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/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 (May 17, 2022) at https://www.dbrsmorningstar.com/research/396929.

Notes:
The principal methodology applicable to the ratings is DBRS Morningstar Master U.S. ABS Surveillance (February 6, 2023; https://www.dbrsmorningstar.com/research/409444).

Other methodologies referenced in this transaction are listed at the end of this press release

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

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 (April 5, 2023)
https://www.dbrsmorningstar.com/research/412303
Operational Risk Assessment for U.S. ABS Originators (April 5, 2023)
https://www.dbrsmorningstar.com/research/412302
Legal Criteria for U.S. Structured Finance (December 7, 2022)
https://www.dbrsmorningstar.com/research/407008
Rating U.S. Structured Finance Transactions (February 6, 2023)
https://www.dbrsmorningstar.com/research/409449
Rating U.S. Credit Card Asset-Backed Securities (August 8, 2022)
https://www.dbrsmorningstar.com/research/401145

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