DBRS Morningstar Finalizes Provisional Ratings on the BasePoint MCA Securitization LLC, Series 2023-1 Notes

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of expandable notes (collectively, the Notes) issued by BasePoint MCA Securitization LLC as follows:

-- $85,544,000 Series 2023-1 Class A Notes at BBB (sf)
-- $14,790,000 Series 2023-1 Class B Notes at BB (sf)

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

-- The transaction's capital structure and available credit enhancement. Subordination, overcollateralization (OC), cash held in the Reserve Account and available excess spread, as well as other structural provisions create credit enhancement levels which are sufficient to support DBRS Morningstar’s stressed cumulative gross loss (CGL) hurdle rate assumptions of 38.292% and 29.030%, respectively, for each of the BBB (sf) and BB (sf) rating categories. The respective stressed cumulative net loss (CNL) hurdle rates for the Class A and Class B Notes are 34.01% and 25.25%. The required OC during the revolving period will be equal to 10.05% of the collateral pool balance. The Notes will amortize sequentially on a “full turbo” basis during the amortization period.

-- The transaction parties’ capabilities with regard to originating, underwriting, and servicing of merchant cash advances and small business loans. DBRS Morningstar performed an operational review of BasePoint, Carmel Solution, and each of the Originators (Fora, Samson, and Pearl/Revenued) and found each of them to be acceptable for their respective role contemplated in the transaction. CBIZ MHM, LLC (acting as the Administrator) will, among other things, conduct a monthly data file review of a sample of 100 Receivables from the Master Servicer’s month-end data file and compare, confirm or calculate, as applicable, 17 data fields with reference to either source documentation or the Master Servicer’s (or the applicable Originator’s) underlying operating system or database. The heightened data error rate may ultimately result in the occurrence of a Rapid Amortization Event.

-- A review by DBRS Morningstar of the historical performance going back to 2015 with regard to Advance Receivables originated by Pearl and Samson in addition to a review of the historical performance of the Advance Receivables purchased by CRA Funding 1, LLC from each Originator. These data sets were further supplemented by a review of historical performance data for the recent term ABS transactions sponsored by Fora Financial LLC.

-- A review of the initial collateral pool as of the Statistical Cut-Off Date of Sept. 29, 2023. The receivables are relatively short-term in nature, with a weighted average (WA) original expected collection term of 11.3 months, and a WA remaining expected collection term of 8.7 months. The collateral has a WA right-to-receive (RTR) Ratio of 1.32x, with a WA Calculated Receivables Yield at Origination of 61.6%, and a Performance Ratio (calculated as total collections divided by total expected collections) of 94.7%.

-- Collateral eligibility requirements and concentration limits that ensure a minimum RTR (the amount a Merchant agrees to pay to an Originator relative to the amount of advance received by a Merchant from such Originator) for the collateral pool of 1.265x and the Performance Ratio (collections received over collections originally expected to be received) of at least 80%, as well as the consistent credit quality and diversity of the collateral pool backing the notes during the revolving period. The collateral concentration limits and eligibility criteria cover original expected collection term, original funded amount, exposure to each individual Originator, Merchant time in business, receivables yield, and other metrics.

-- Rapid Amortization Events which are designed to protect noteholders in the event of weaker-than-expected collateral performance, including a breach of the following collateral performance triggers: (1) Three-Month Weighted Average Calculated Receivables Yield of less than 30.00%, (2) Three-Month Weighted Average Excess Spread of less than 4.00%, and (3) Three-Month Average Delinquency Ratio greater than 15.00%.

-- The legal structure and legal opinions that address the true sale of the receivables, the nonconsolidation of the assets of the Issuer, that the Indenture Trustee has a valid first-priority security interest in the assets, and consistency with DBRS Morningstar's "Legal Criteria for U.S. Structured Finance”.

-- 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 2023 Update," published on December 19, 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.

DBRS Morningstar’s credit rating on the securities referenced herein addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related Interest Payment and the related Principal Balance.

DBRS Morningstar’s credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. The associated contractual payment obligations that are not financial obligations for each of the rated notes are the interest on any unpaid Interest Payment and the indemnification of noteholders by the Backup Master Servicer.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The DBRS Morningstar short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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/416784 (July 4, 2023).

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

The principal methodologies applicable to the rating are:

Global Methodology for Rating CLOs and Corporate CDOs and the DBRS Morningstar CLO Insight Model version 1.0.0.0 (October 22, 2023) https://www.dbrsmorningstar.com/research/422269

Rating U.S. Structured Finance Transactions (October 30, 2023)
https://www.dbrsmorningstar.com/research/422592

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

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit 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 credit rating action.

This is a solicited credit rating.

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

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit 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 (July 20, 2023),
https://www.dbrsmorningstar.com/research/417415

Operational Risk Assessment for U.S. ABS Originators (July 20, 2023),
https://www.dbrsmorningstar.com/research/417416

Legal Criteria for U.S. Structured Finance (December 7, 2023)
https://www.dbrsmorningstar.com/research/425081

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