DBRS Morningstar Finalizes Provisional Ratings on Avant Credit Card Master Trust, Series 2021-1 Asset-Backed Notes

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of Series 2021-1 notes (the Notes) issued by Avant Credit Card Master Trust (the Issuer) as follows:

-- $111,970,000 Class A Notes at AA (low) (sf)
-- $10,160,000 Class B Notes at A (sf)
-- $13,320,000 Class C Notes at BBB (low) (sf)
-- $14,550,000 Class D Notes at BB (low) (sf)

The ratings are based on DBRS Morningstar’s review of the following analytical considerations:

(1) The analysis incorporating the impact of the coronavirus pandemic.
-- 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 COVID-19 pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that, although COVID-19 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 COVID-19 may nonetheless bring other risks to the forefront in coming months and years.
-- DBRS Morningstar's projected losses include the assessment of the impact of the coronavirus. The DBRS Morningstar's expected net charge off rate is 17.0%.

(2) The transaction’s capital structure and sufficiency of available credit enhancement.
--Overcollateralization in the form of excess collateral amount, reserve account requirement, excess spread, and subordination. The transaction capital structure withstands stressed cash flow assumptions and repays investors according to the terms under which they have invest. The rating address the payment of timely interest and ultimate principal by the Series Maturity Date.
-- The Reserve Account has been funded at closing with an amount equal to 0.25% of the Initial Series 2021-1 Collateral Amount. The Required Reserve Account Amount is at least 0.25% of the Initial Series 2021-1 Collateral Amount and, on and after the January 2022 Payment Date, will be funded up to 3.0% of the Series 2021-1 Collateral Amount based on the level of the Three-Month Average Excess Spread Percentage.

(3) Avant’s (the Company) experience as an originator and a servicer in revolving credit card receivables.

(4) The Company’s limited historical performance data and DBRS Morningstar’s expected collateral performance.
-- In order to account for the limited historical in performance data, DBRS Morningstar applied higher charge-off multiples and yield and principal payment rate reduction stresses for each rating level scenario. DBRS Morningstar’s base case net loss rate, principal payment rate, and yield rate are 17.0%, 11.0%, and 35.0%, respectively.

(5) Future receivables additions.
--With an absence of concentration limits in the transaction, the credit quality of the underlying receivables could deteriorate during the revolving period, if Avant decides to add receivables from less credit worthy accounts relative to those of the Company’s managed portfolio. However, an Early Amortization Event as well as the Required Reserve Account Amount based on the Three-Month Average Excess Spread Percentage will help mitigate the risk of deterioration of the underlying collateral pool performance.

(6) Bank partnership lending model.
--Avant has a strategic partnership with WebBank, whereby WebBank, a Utah chartered industrial bank, originates loans through the Avant Platform. WebBank as the account owner, retains the right to change the program guidelines and materials related to Avant Program or to terminate the Receivables Purchase Agreement under certain circumstances. Avant is unable to originate credit card receivables without a partner bank, so such unexpected changes by WebBank, with no alternative partner bank present, may result in payment disruptions to noteholders.

(7) Regulatory Environment
-- The interest rates that are charged to the borrowers in the collateral pool are based on WebBank’s ability under federal law to export the interest rates permitted by Utah law. As an assignee of credit card receivables originated by WebBank, the Issuer could be subject to the risks of litigation and regulatory actions.
-- Unlike the facts in issue in Madden, in this transaction, WebBank, an FDIC-insured state-chartered bank located in Utah, will continue to own the credit card accounts it originates after the sale of the transferred credit card receivables.

(8) The legal structure and legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with Avant and that the trust has a valid, perfected 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 Rating U.S. Credit Card Asset-Backed Securities (August 9, 2021), 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.

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].

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