DBRS Morningstar Finalizes Provisional Ratings on Republic Finance Issuance Trust 2019-A

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following asset-backed notes issued by Republic Finance Issuance Trust 2019-A:

-- $238,430,000 Class A Notes at A (sf)
-- $21,940,000 Class B Notes at BBB (sf)
-- $14,630,000 Class C Notes at BB (sf)

The ratings are based on a review by DBRS Morningstar of the following analytical considerations:

-- Transaction capital structure, current 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.
-- Republic Finance, LLC’s (Republic or the Company) capabilities with regard to originations, underwriting and servicing.
-- DBRS Morningstar performed an operational review of Republic and considers the entity to be an acceptable originator and servicer of personal loans with an acceptable backup servicer.
-- Republic’s senior management team has considerable experience and a successful track record within the consumer loan industry.
-- Acquisition of a majority stake in the Company by CVC Capital Partners (CVC) in December 2017. CVC has since implemented a growth strategy that includes increasing the number of branches, centralizing the underwriting and servicing functions and building an online presence.
-- In April 2019, Republic completed the implementation of centralized underwriting policies and processes for all branches, which led to the ability to create a hybrid servicing model. The Company is in the process of building up staffing levels at a new fully centralized collections center in Charlotte, North Carolina.
-- Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS Morningstar) will serve as backup servicer. This transaction includes an additional Early Amortization Event that addresses a data mapping failure. This early amortization will occur if the backup servicer has not completed the data mapping within 60 days of closing.
-- The credit quality of the collateral and performance of Republic’s consumer loan portfolio. DBRS Morningstar used a hybrid approach in analyzing the Republic portfolio that incorporates elements of static pool analysis, employed for assets such as consumer loans, and revolving asset analysis, employed for assets such as credit card master trusts.
-- The legal structure and presence of legal opinions that will address the true sale of the assets from the Seller to the Depositor, the non-consolidation of the special-purpose vehicle with the Seller, that the Indenture Trustee has a valid first-priority security interest in the assets and that it is consistent with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

Credit enhancement in the transaction consists of overcollateralization, subordination, excess spread and a reserve account. The rating on the Class A Notes reflects the 19.50% of initial hard credit enhancement provided by the subordinated notes in the pool, the reserve account (1.00%) and overcollateralization (6.00%). The ratings on the Class B Notes and the Class C Notes reflect 12.00% and 7.00% 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. Credit Card Asset-Backed Securities and Rating U.S. Structured Finance Transactions, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 [email protected].

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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