DBRS Morningstar Finalizes Provisional Rating on LFS 2021A, LLC

DBRS, Inc. (DBRS Morningstar) finalized its provisional rating on the following class of notes issued by LFS 2021A, LLC (the Issuer):

-- $89,000,000 Fixed Rate Asset Backed Notes, Class A 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) pandemic, available in its commentary “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on March 17, 2021, and are reflected in DBRS Morningstar’s rating analysis.

-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.

-- While the impact of the coronavirus pandemic 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 because of the impact of the coronavirus pandemic.

-- 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 affected by the economic stress caused by the effects of the pandemic.

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

-- The full-turbo structural feature.

-- The underwriting and origination capabilities of the Originators.

-- The ability of US Claims 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 nonconsolidation of the special-purpose vehicle with US Claims Holdings, LLC, 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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 dbrsmorningstar.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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

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

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