DBRS Morningstar Assigns Rating to J.G. Wentworth XLVIII, LLC, Series 2020-E1 Notes

DBRS, Inc. (DBRS Morningstar) assigned a rating of A (sf) to the $100,000,000 Fixed Rate Asset Backed Notes, Series 2020-E1 (the Notes) issued by J.G. Wentworth XLVIII, LLC.

The rating is based on DBRS Morningstar’s review of the following analytical considerations:
-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns,” published on September 8, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that, although the coronavirus pandemic remains a risk to the outlook, uncertainty around the macroeconomic effects of the pandemic has gradually receded. Current median forecasts considered in the baseline macroeconomic scenarios incorporate some risks associated with further outbreaks but remain fairly positive on recovery prospects given expectations of continued fiscal and monetary policy support. The policy response to the coronavirus pandemic may nonetheless bring other risks to the forefront in coming months and years.

-- 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 7.00%, in the forms of an issuer-invested amount and a 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 82.46% of collateral (by aggregate discounted receivables balance) was represented by exposure to annuity providers with a rating equivalent of A (low) or 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings

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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