Morningstar DBRS Places Credit Ratings on Two Coinstar Funding, LLC ABS Transactions Under Review With Negative Implications

DBRS, Inc. (Morningstar DBRS) placed under review with negative implications the credit ratings on two securities issued by two Coinstar Funding, LLC asset-backed securities (ABS) transaction as follows:

-- Coinstar Funding, LLC, Series 2017-1, Class A-2 Notes
-- Coinstar Funding, LLC, Series 2018-1, Class A-2 Notes

The under review with negative implications designations are based on the following analytical considerations:

-- The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns: December 2023 Update,” published on December 19, 2023. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

-- Revenue per kiosk have been slow to recover to pre-pandemic levels as a result of prolonged lower coin conversion volumes in the U.S., despite a gradual increase in the number of kiosks in place as well as a slightly higher transaction fee.

-- Amendments were executed with noteholder consent for a partial waiver of the April 2023 anticipated repayment date rapid amortization event for approximately three years. However, this also added net debt of approximately $43 million to the transaction in the form of a Manager Advance that is senior in payment priority to the rated ABS notes. This resulted in a lower breakeven cash flow result than prior to the execution of the amendment. Morningstar DBRS will continue to monitor the transactions performance and any revenue developments.

-- There have been two quarterly noteholder reports since the amendment was executed.

-- Other components of securitized net cash flows are improving, including international revenues and other income, which are smaller components of total revenue.

-- Debt service coverage ratios and leverage ratios remain in compliance with covenants as of the latest quarterly report.

-- The transaction parties’ capabilities with regard to manager, back-up manager, and servicer.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023) https://dbrs.morningstar.com/research/416784.

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

The principal methodology applicable to the credit ratings is DBRS Morningstar Master U.S. ABS Surveillance (22 October 2023) https://dbrs.morningstar.com/research/422279.

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

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

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

DBRS, Inc.
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The credit 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 (July 20, 2023) https://www.dbrsmorningstar.com/research/417415

Operational Risk Assessment for U.S. ABS Originators (July 20, 2023) https://www.dbrsmorningstar.com/research/417416

Legal Criteria for U.S. Structured Finance (December 7, 2023) https://www.dbrsmorningstar.com/research/425081

Rating U.S. Structured Finance Transactions (October 30, 2023) https://www.dbrsmorningstar.com/research/422592

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.