DBRS Morningstar Upgrades Rating on Affirm Operational Loans IV Trust

DBRS, Inc. (DBRS Morningstar) upgraded its rating on Affirm Operational Loans IV Trust’s Class A Loan

-- Class A Loan upgraded to A (high) (sf) from A (low) (sf)

The rating action is in relation to the Amendment to the Revolving Credit and Security Agreement dated January 20, 2023 between Affirm Operational Loans IV Trust as Borrower, Salisbury Receivables Company LLC as Lender, and Barclays Bank PLC as Administrative Agent. The Class A Loan is secured by unsecured consumer loans originated by Cross River Bank (CRB) and sourced by Affirm, Inc. (Affirm).

The rating is based on 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 December 2022 Update, published on December 21, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

-- The transaction structure and sufficiency of the warehouse facility’s advance rate and other forms of credit enhancement, which are commensurate with a rating of A (high) (sf).

-- Concentration limits and eligibility criteria, which will help maintain the characteristics of the revolving loan pool. A worst-case loss pool was constructed giving consideration to the concentration limits present in the structure. Additionally, DBRS used the DBRS CLO Asset Model to assess stressed default rates assuming the worst case merchant and merchant industry exposure giving consideration to the concentration limits present in the structure.

-- The warehouse facility has certain performance-related triggers, which, if violated, will result in an early amortization event.

-- The experience, sourcing, and servicing capabilities of Affirm, Inc. (Affirm).

-- The experience, underwriting, and origination capabilities of Affirm Loan Services LLC (ALS), Cross River Bank (CRB), and Celtic Bank.

-- The ability of Nelnet Servicing, LLC to perform duties as a Backup Servicer.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/ Governance factor(s) that had a significant or relevant effect on the credit analysis

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings. (May 17, 2022)

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the rating is Rating U.S. Structured Finance Transactions at https://www.dbrsmorningstar.com/research/405084/rating-us-structured-finance-transactions (November 08, 2022).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 .

The rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the rating process for this rating action.
DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

Rating U.S. Structured Finance Transactions (November 8, 2022) https://www.dbrsmorningstar.com/research/405084/rating-us-structured-finance-transactions.

Operational Risk Assessment for U.S. ABS Servicers (November 8, 2022) https://www.dbrsmorningstar.com/research/405083/operational-risk-assessment-for-us-abs-servicers.

Operational Risk Assessment for U.S. ABS Originators (November 8, 2022) https://www.dbrsmorningstar.com/research/405082/operational-risk-assessment-for-us-abs-originators.

Legal Criteria for U.S. Structured Finance (December 7, 2022) https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance.

Rating CLOs and CDOs of Large Corporate Credit (January 26, 2022)
https://www.dbrsmorningstar.com/research/391226/rating-clos-and-cdos-of-large-corporate-credit

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