DBRS Morningstar Assigns Ratings to SPSS 2021-A LLC

DBRS, Inc. (DBRS Morningstar) assigned ratings to the following classes of notes to be issued by SPSS 2021-A LLC (the Issuer):

-- $164,500,000 Class A Notes at AAA (sf)
-- $322,000,000 Class B Notes at A (sf)
-- $11,750,000 Class C Notes at BBB (sf)
-- $6,500,000 Class D Notes at BB (sf)

The ratings are 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 - 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.

-- The collateral exclusively comprises guaranteed structured settlements receivables; no lottery receivables are included. Furthermore, the transaction does not have a prefunding period.

-- The transaction’s capital structure and form and sufficiency of available credit enhancement, as well as 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 timely payment of interest on a monthly basis and repayment of principal by the Legal Final Payment Date in September 2075 for the Class A Notes, and the ultimate payment of interest and principal by the Legal Final Payment Date for all other classes of Secured Notes.

-- DBRS Morningstar’s assumed stressed cumulative net loss (CNL) hurdle rates of 18.27%, 4.70%, 3.24%, and 1.01% in the cash flow scenarios are commensurate with the AAA (sf), A (sf), BBB (sf), and BB (sf) ratings, respectively. The CNL hurdle rates reflect the pool’s diverse and relatively highly rated insurance carrier group, with 93.1% of the present value of the collateral pool represented by insurance carriers that have an equivalent of at least an “A” financial strength rating (FSR). The collateral pool is relatively diverse, with 77 individual insurance carriers and the five largest and 10 largest obligors accounting for approximately 55.9% and 72.7%, respectively, of the initial Aggregate Discounted Balance (ADB) as of the Cut-Off Date.

-- DBRS Morningstar assessed the CNL hurdle rates at each rating level by reviewing the collateral pool's ADB by carrier and the associated scheduled monthly payment streams. The ADB was derived for each individual carrier using the weighted-average life (WAL) of payments and the transaction specific discount rate (2.860%). DBRS Morningstar's stressed CNL hurdle rate for the collateral pool at each rating level is the higher of the hurdle rates assessed using the largest obligor analysis and the DBRS CLO Asset Model analysis.

-- DBRS Morningstar’s cash flow analysis tested the ability of the transaction to generate cash flows sufficient to service the interest and principal payments under four different default timing scenarios.

-- SuttonPark Capital LLC (SuttonPark) is an established originator and servicer of structured settlements and annuity contract receivables. Over the years, the company has sponsored and supported several ABS transactions secured by such collateral. DBRS Morningstar deems SuttonPark an acceptable originator and servicer of structured settlements and annuity receivables.

-- Vervent Inc. is a backup servicer and, if needed, could assume primary servicing. In addition, Wells Fargo will act as Indenture Trustee under the Indenture and Sale and Servicing Agreement. On March 23, 2021, Wells Fargo announced it had entered into a definitive agreement to sell its corporate trust business to Computershare, Ltd., with an expected closing in the second half of 2021.

-- The transaction is supported by an established structure and is generally consistent with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance” methodology. Legal opinions covering true sale and nonconsolidation are 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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