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KBRA Assigns Preliminary Ratings to Upgrade Receivables Trust 2019-2

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Upgrade Receivables Trust 2019-2 (“UPGR 2019-2” or the “Issuer”). This is a $162.261 million consumer loan ABS transaction that is expected to close on August 22, 2019.

This transaction represents the fifth rated ABS securitization collateralized by unsecured consumer loans originated through the online marketplace lending platform operated by Upgrade, Inc. (“Upgrade”) and the second in 2019 from the Upgrade Receivables Trust (“UPGR”) shelf. The proceeds from the sale of the notes will be used to purchase the loans and related rights from Upgrade Receivables Depositor LLC (the “Depositor”), who purchased the loans from the transferors, to fund the reserve account and to pay transaction expenses. The Depositor will in turn sell the loans to the Issuer.

Established in May 2016, with the first loan originated in April 2017, Upgrade operates an online marketplace lending platform (www.upgrade.com) (the “Platform”). Upgrade was co-founded by Renaud Laplanche, co-founder and former CEO of LendingClub Corporation, along with former LendingClub employees. The Platform offers fixed rate, fully amortizing unsecured consumer loans with original balances ranging from $1,000-$50,000 and original terms of three years and five years. These loans are categorized within three segments based on certain credit-grading criteria: Prime Plus, Prime, and Near Prime. The loans on the Platform are originated by WebBank. Generally, the primary purpose of the loan is debt consolidation. Since inception the Platform has facilitated nearly $2.0 billion in loans with nearly 200,000 borrowers served. Upgrade has raised $150 million in total equity by investors including CreditEase, VY Capital, Union Square Ventures and Sands Capital. Upgrade’s total Stockholder’s Equity as of March 31, 2019 was $50 million.

The transaction has initial credit enhancement levels of 42.50% for the Class A Notes, 32.65% for the Class B Notes, 19.75% for the Class C Notes and 9.85% for the Class D Notes. Credit enhancement consists of excess spread, overcollateralization, subordination (in the case of the Class A, Class B, and Class C Notes) and a reserve account funded at closing.

KBRA applied its Global Consumer Loan ABS Rating Methodology and its Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and Upgrade’s historical gross loss data. KBRA also conducted an operational assessment of the Platform, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.

 

Preliminary Ratings Assigned: Upgrade Receivables Trust 2019-2

Class

Preliminary Rating

Expected Initial Class Principal

A

A (sf)

$103,818,000

B

BBB (sf)

$17,631,000

C

BB (sf)

$23,091,000

D

B- (sf)

$17,721,000

To access ratings, reports and disclosures, click here.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization 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, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical:

Alla Mikhalevsky, CFA, Director

(646) 731-3356

amikhalevsky@kbra.com

Brendan Carter, Associate Director

(646) 731-3315

bcarter@kbra.com

Eric Neglia, Managing Director

(646) 731-2456

eneglia@kbra.com

Abby Barkwell, Associate Director

(646) 731-3304

abarkwell@kbra.com

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