Morningstar DBRS Assigns Provisional Credit Ratings to Lendmark Funding Trust 2024-1

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the classes of notes to be issued by Lendmark Funding Trust 2024-1 (Lendmark 2024-1), as follows:

-- $237,940,000 Class A Notes at AAA (sf)
-- $46,110,000 Class B Notes at AA (low) (sf)
-- $26,660,000 Class C Notes at A (low) (sf)
-- $39,290,000 Class D Notes at BBB (low) (sf)

The provisional credit ratings are based on Morningstar DBRS' review of the following analytical considerations:

-- The transaction assumptions consider Morningstar DBRS’ 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 Morningstar DBRS’ moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.
-- The Morningstar DBRS CNL assumption is 12.15%. The CNL assumption reflects an increase in portfolio losses throughout 2022 coupled with the worst-case loss pool constructed which additionally gives consideration to the concentration limits present in the structure. For Series 2024-1, Morningstar DBRS also gave 5.00% recovery credit for all products based upon historical recovery performance.
--This is the third Morningstar DBRS AAA (sf) rated term transaction for the Lendmark ABS platform.
-- The transaction’s form and sufficiency of available credit enhancement.
-- Overcollateralization, note subordination, reserve account amounts, and excess spread create credit enhancement levels that are commensurate with the proposed ratings.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and principal by the legal final maturity date.
-- Lendmark’s capabilities with regard to originations, underwriting, and servicing.
-- The credit quality and performance of the Lendmark’s consumer loan portfolio.
-- Morningstar DBRS has performed an operational review of Lendmark and considers the entity an acceptable originator and servicer of unsecured personal loans with an acceptable back-up servicer.
-- The legal structure and expected legal opinions that will address the true sale of the assets, the nonconsolidation of the trust, that the trust has a valid first-priority security interest in the assets, and the consistency with Morningstar DBRS' “Legal Criteria for U.S. Structured Finance.”

Morningstar DBRS’ 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 Distribution Amount, and the related Note Balance.

Morningstar DBRS’ 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 are the related interest on unpaid Interest Distribution Amount for each of the rated notes.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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 Morningstar DBRS 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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023; https://dbrs.morningstar.com/research/416784).

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

The principal methodologies applicable to the credit rating are Rating U.S. Structured Finance Transactions – Appendix I: U.S. consumer Loan ABS Transaction (October 30, 2023), https://dbrs.morningstar.com/research/422592/rating-us-structured-finance-transactions, and Rating U.S. Credit Card Asset-Backed Securities (July 24, 2023), https://dbrs.morningstar.com/research/417562/rating-us-credit-card-asset-backed-securities.

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

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

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.

Morningstar DBRS 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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-us-abs-servicers

-- Operational Risk Assessment for U.S. ABS Originators (July 20, 2023) https://www.dbrsmorningstar.com/research/417416/operational-risk-assessment-for-us-abs-originators

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

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