DBRS Morningstar Assigns Rating to J.G. Wentworth XLV, LLC, Series 2020-A2 Notes

DBRS, Inc. (DBRS Morningstar) assigned the rating of A (sf) to the $100,000,000 Fixed Rate Asset Backed Notes, Series 2020-A2 (the Notes) issued by J.G. Wentworth XLV, LLC.

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, available in its commentary “Global Macroeconomic Scenarios - June 2021 Update,” published on June 18, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, that have been regularly updated. The scenarios were last updated on June 18, 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 continued success in containment during the second half of 2021, enabling the continued relaxation of restrictions.

-- The generally high credit quality of annuity providers and their improved capitalization positions and risk management frameworks, which have been enhanced since the global financial crisis of 2008–09. DBRS Morningstar does not expect the performance of the structured settlements asset-backed securities (ABS) transactions to be materially affected in the near term as a result of those factors. Furthermore, given the relatively “light-touch” servicing requirements, structured settlements ABS transactions have not experienced any servicing challenges related to the coronavirus pandemic. As a result, DBRS Morningstar did not adjust any assumptions in its analysis of the structured settlements ABS for any impact from the coronavirus pandemic.

-- Transaction capital structure and form and sufficiency of available credit enhancement. The initial hard credit enhancement for the Notes is 7.11% and is in the form of issuer invested amount and cash reserve account.

-- The ability of the transaction to withstand stresses in the cash flow scenarios and repay investors in accordance with the terms of the transaction. For this transaction, the rating addresses timely payment of interest on a monthly basis and repayment of principal by the legal final maturity date.

-- The J.G. Wentworth Company (the Company) is an established originator and servicer of structured settlements, annuity contracts, and lottery receivables. Over the years, the Company has sponsored and acted as the servicer of multiple ABS transactions secured by such collateral.

-- Vervent Inc. (formerly known as Portfolio Financial Servicing Company) is a backup servicer and, if needed, could assume primary servicing.

-- The collateral pool mix and credit quality of the collateral pool at closing. At closing, approximately 82.03% of collateral (by aggregate discounted receivables balance) was represented by exposure to annuity providers with a rating equivalent of A (low) and better.

-- Collateral for the Notes exclusively comprises structured settlements receivables and annuity receivables; no lottery receivables or life-contingent collateral are included in the transaction.

-- The transaction is supported by an established structure and is consistent with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance” methodology. Legal opinions covering, among other things, true sale and nonconsolidation were also provided.

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 Rating U.S. Structured Settlements Asset-Backed Securitizations (October 29, 2020), 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 releases: 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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