DBRS Morningstar Assigns Provisional Rating to LFS 2020A, LLC

DBRS, Inc. (DBRS Morningstar) assigned a provisional rating to the following class of notes to be issued by LFS 2020A, LLC (the Issuer):

-- $30,400,000 Fixed Rate Asset Backed Notes at A (sf)

The rating is based on DBRS Morningstar’s review of the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios,” published on April 16, 2020.

-- The transaction assumptions were derived in consideration of the moderate scenario described in the commentary (the moderate scenario serving as the primary anchor for current ratings), whereby containment of the coronavirus will begin during Q2 2020, resulting in a gradual relaxation of stay-at-home measures and nonessential business closures, allowing a gradual economic recovery to begin starting in Q3 2020.

-- While the impact of coronavirus has had an adverse effect on the U.S. borrower in general, performance of the underlying receivables in the transaction is expected to remain resilient, because litigation funding receivables and loan receivables are underwritten based on the strength of the case to reach a successful resolution rather than plaintiff's ability to repay. As a result, DBRS Morningstar has not made any material adjustments to its loss expectation for the present transaction solely due to the impact of coronavirus.

-- Advances are most often repaid by insurance companies, many of which carry strong ratings. While there is exposure to the insurance industry, DBRS Morningstar does not expect the insurance carrier's ability to pay in the short to medium term to be adversely impacted by the economic stress due to coronavirus.

-- Transaction capital structure, proposed ratings, and sufficiency of available credit enhancement.

-- The full-turbo structural feature.

-- The underwriting and origination capabilities of DRB Litigation Funding, LLC.

-- The ability of DRB Capital, LLC, as Servicer, to make and monitor collections on the collateral pool and other required activities.

-- 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 DRB, that the trust has a valid first-priority security interest in the assets, and consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is U.S. ABS General Ratings Methodology (December 2018), which can be found on dbrs.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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.dbrsmorningstar.com or contact us at [email protected].

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277