DBRS Morningstar Confirms Four Ratings on Three LFS, LLC transactions

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on four classes of debt as follows:

LFS 2021A, LLC
-- Fixed Rate Asset Backed Notes, Class A confirmed at A (sf)

LFS 2021B, LLC
-- Class A Notes confirmed at A (sf)

LFS 2022A, LLC
-- Fixed Rate Asset Backed Notes, Class A confirmed at A (sf)
-- Fixed Rate Asset Backed Notes, Class B confirmed at BBB (sf)

The rating actions are 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: April 2023 Update,” published on April 28, 2023. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

-- Credit enhancement is in the form of overcollateralization, subordination (as applicable), and a liquidity reserve.

--The transactions feature a full-turbo principal payment structure, which allows credit enhancement to build up rapidly.

-- Overall, the collateral performance of the transactions has been in line with expectations.

-- The transaction parties’ capabilities regarding origination and servicing.

-- While the impact of the pandemic has had an adverse effect on U.S. borrowers in general, DBRS Morningstar expects the performance of the underlying receivables in the transaction to remain resilient because litigation funding receivables and medical funding receivables are underwritten based on the strength of the case to reach a successful resolution rather than the plaintiff's ability to repay.

-- Advances are often repaid by insurance companies. While there is exposure to the insurance industry in this transaction, DBRS Morningstar does not expect the economic stress caused by the pandemic to adversely affect insurance carriers’ ability to pay in the short to medium term.

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:

The principal methodology applicable to the ratings is DBRS Morningstar Master U.S. ABS Surveillance (May 16, 2023; https://www.dbrsmorningstar.com/research/414028).

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.
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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.

Operational Risk Assessment for U.S. ABS Servicers (April 5, 2023)
https://www.dbrsmorningstar.com/research/412303/operational-risk-assessment-for-us-abs-servicers
Operational Risk Assessment for U.S. ABS Originators (April 5, 2023)
https://www.dbrsmorningstar.com/research/412302/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 U.S. Structured Finance Transactions (February 6, 2023)
https://www.dbrsmorningstar.com/research/409449/rating-us-structured-finance-transactions

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