DBRS Finalizes Provisional Ratings on Lendmark Funding Trust 2018-2

DBRS, Inc. (DBRS) finalized its provisional ratings on the following notes issued by Lendmark Funding Trust 2018-2 (Series 2018-2):

-- $234,840,000 Series 2018-2, Class A (the Class A Notes) rated AA (sf)
-- $20,080,000 Series 2018-2, Class B (the Class B Notes) rated A (sf)
-- $22,140,000 Series 2018-2, Class C (the Class C Notes) rated BBB (sf)
-- $22,940,000 Series 2018-2, Class D (the Class D Notes) rated BB (sf)

The ratings are based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and principal by the legal final maturity date.
-- Lendmark Financial Services, LLC’s (Lendmark) capabilities with regard to originations, underwriting and servicing.
-- The credit quality of the collateral and performance of Lendmark’s consumer loan portfolio. DBRS used a hybrid approach in analyzing the Lendmark portfolio that incorporates elements of static pool analysis, employed for assets such as consumer loans, and revolving asset analysis, employed for such assets as credit card master trusts.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the issuer, the non-consolidation of the special-purpose vehicle with Lendmark and that the trust has a valid first-priority security interest in the assets and is consistent with the DBRS methodology “Legal Criteria for U.S. Structured Finance.”

The Series 2018-2 transaction represents the sixth securitization of a portfolio of non-prime and subprime personal loans originated through Lendmark’s branch network.

Credit enhancement in the transaction consists of overcollateralization, subordination, excess spread and a Reserve Account. The rating on the Class A Notes reflects the 26.80% of initial hard credit enhancement provided by the subordinated notes in the pool, the Reserve Account (0.50%) and overcollateralization (5.85%). The ratings on the Class B Notes, the Class C Notes and the Class D Notes reflect 20.50%, 13.55% and 6.35% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

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

The principal methodologies are Rating U.S. Structured Finance Transactions: Appendix I — U.S. Consumer Loan ABS Transactions and Rating U.S. Credit Card Asset-Backed Securities, which can be found on dbrs.com under Methodologies.

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.