Morningstar DBRS Takes Credit Rating Actions on Five Upstart Securitization Trust Transactions

DBRS, Inc. (Morningstar DBRS) upgraded one credit rating, confirmed four credit ratings, downgraded one credit rating, and discontinued one credit rating as a result of repayment, in five Upstart Securitization Trust transactions.

The credit rating actions are based on 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.

-- For Upstart Securitization Trust 2021-3, Upstart Securitization Trust 2021-4, and Upstart Securitization Trust 2021-5, losses are tracking above the Morningstar DBRS initial base-case CNL expectations. The current level of hard CE and estimated excess spread are sufficient to support the Morningstar DBRS projected remaining CNL assumption at a multiple of coverage commensurate with the credit ratings.

-- For Upstart Securitization Trust 2022-1, the collateral performance to date is tracking above the Morningstar DBRS initial base-case CNL expectation of 14.65%. As of the February 2024 payment date, Upstart Securitization Trust 2022-1 has amortized to a pool factor of 38.25% and has a current CNL of 21.11%.

-- Because of the weaker-than-expected performance, Morningstar DBRS has revised the base-case loss expectation for Upstart Securitization Trust 2022-1 to 33.75%.

-- As of the February 2024 payment date, Upstart Securitization Trust 2022-1 does not have any CE available from either the overcollateralization or the reserve account as both have been fully depleted. As a result, the current level of hard CE and estimated excess spread are insufficient to support the current rating on the Class B and, consequently, the credit rating has been downgraded to a rating level commensurate with the current implied multiple.

-- The transactions include a CNL Ratio Amortization Event that, if tripped, would cause a lockout of any distributions, if available, to the Certificateholders. As of the February 2024 payment date, Upstart Securitization Trust 2022-1 is in breach of the CNL Ratio Amortization Event.

-- The transaction parties’ capabilities with regard to originating, underwriting, and servicing.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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 at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

Notes:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (February 22, 2024), https://dbrs.morningstar.com/research/428506.

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

The credit ratings were initiated at the request of the rated entity.

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

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

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

-- Operational Risk Assessment for U.S. ABS Servicers (February 22, 2024),
https://dbrs.morningstar.com/research/428505
-- Operational Risk Assessment for U.S. ABS Originators (February 22, 2024),
https://dbrs.morningstar.com/research/428504
-- Legal Criteria for U.S. Structured Finance (December 7, 2023),
https://dbrs.morningstar.com/research/425081
-- Rating U.S. Structured Finance Transactions (February 22, 2024),
https://dbrs.morningstar.com/research/428503

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.