KBRA issues preliminary ratings to Pagaya AI Debt Trust 2022-5

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NEW YORK–(BUSINESS WIRE)–KBRA assigns preliminary ratings to three classes of bonds issued by Pagaya AI Debt Trust 2022-5 (“PAID 2022-5”), a consumer loan ABS transaction.

Pagaya Structured Products LLC is a wholly owned subsidiary of Pagaya US Holding Company LLC (formerly known as Pagaya Investments US LLC), which is a wholly owned subsidiary of Pagaya Technologies Ltd. (“Pagaya Technologies”), an Israeli company. Pagaya Technologies is a financial technology company in the lending market that uses machine learning, big data analytics, and AI-based credit and analytics technology. This transaction is the third publicly sponsored rated securitization transaction by Pagaya Structured Products LLC (collectively with its affiliates, “Pagaya” or the “Company”). Previously, Pagaya US Holding Company LLC served as sponsor for 16 unsecured consumer asset securitizations. Overall, Pagaya Structured Products LLC and Pagaya US Holding Company LLC have completed 30 securitizations for over $12 billion since 2018, including 21 secured by unsecured consumer assets, seven securitizations secured by auto loan receivables and two securitizations secured by a loan backed by a single-family rental. Properties.

PAID 2022-5 has initial credit enhancement levels of 35.85% for Class A Notes and 23.00% for Class B Notes. The credit enhancement includes overcollateralisation, subordination of Note Classes first lien, a cash reserve account and an excess spread.

PAID 2022-5 will issue two classes of notes totaling $387.5 million. Proceeds from ticket sales and collections will be used to fund: (i) the pre-funding account; (ii) the reserve account; and (iii) pay certain transaction fees. PAID 2022-5 is a fully pre-funded transaction where there is no collateral funded at closing and the Notes are initially backed by amounts deposited in the pre-funded account. During the six-month pre-funding period, amounts deposited in the pre-funding account will be used to purchase unsecured consumer loans, subject to eligibility criteria and concentration limits, from the following MPL platforms: LendingClub Bank , National Association (“LendingClub”); MF Consumer Loan Trust (“Marlette”); Prosper Funding LLC (“Prosper”); Front, LLC (“Front”); and Upgrade, Inc. (“Upgrade”); SoFi Lending Corp (“SoFi”), Cross River Bank (collectively, the “Platform Vendors”). Loans issued on the SoFi platform will be sold directly to the depositor by Cross River Bank. In addition, Pagaya may direct the Depositor to purchase Loans issued through a Platform Seller but held by its originating bank, including LendingClub and Cross River Bank (“CRB”). Each Platform Vendor or an Affiliate of each Platform Vendor will act as a servicer for Loans issued through its Platform. Loans issued by an originating bank are serviced by the originating bank, the platform vendor, or an affiliate of the platform vendor. Loans for purchase by Pagaya are issued or sold through the Platform Vendors with the assistance of proprietary credit technology provided by Pagaya Technologies. This proprietary credit technology is used to assess the credit quality of borrowers or potential borrowers from platform sellers and is based on artificial intelligence and machine learning.

KBRA applied its global ABS rating methodology for consumer loans, as well as its global structured financial counterparty methodology and its global ESG rating methodology as part of its analysis of the proposed capital structure for the transaction and historical data. on Pagaya’s gross losses. KBRA reviewed its operational reviews of Pagaya and each of the platform vendors, as well as periodic update calls with the company and platform vendors. KBRA conducted surveillance on recent securitizations of each platform. Operational agreements and legal opinions will be reviewed prior to closing.

To access relevant notes and documents, click here.

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Further information on key credit considerations, sensitivity analyzes that consider factors that may affect these credit ratings and how they could lead to an upgrade or downgrade, and ESG factors (where they are a key factor in changing the credit rating or rating outlook) can be viewed in the full rating report mentioned above.

A description of all substantially significant sources that were used to prepare the credit rating and information on the methodology(ies) (including all significant models and sensitivity analyzes of key relevant rating assumptions, if any) used to determine credit rating are available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be found here.

Additional information relating to this rating metric is available in the information disclosure form(s) referenced above. Additional information regarding KBRA’s policies, methodologies, grading scales and disclosures is available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the United States Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a rating agency with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a rating agency with the UK Financial Conduct Authority under the temporary registration scheme. Additionally, KBRA is designated as the Designated Rating Agency by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider.

Analytical Contacts

Prachi Talathi, Associate Director (Senior Analyst)

+1 (646) 731-1275

[email protected]

Melvin Zhou, CFA, Senior Manager

+1 (646) 731-2412

[email protected]

Juhi Paranjape, Principal Analyst

+1 (646) 731-1252

[email protected]

Rahel Avigdor, Principal (Rating Committee Chair)

+1 (646) 731-1203

[email protected]

Business Development Contact Information

Ted Burbage, General Manager

+1 (646) 731-3325

[email protected]

Source: Kroll Bond Rating Agency, LLC

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John A. Bogar