Morningstar DBRS Finalizes Provisional Credit Ratings on Libra Solutions 2024-1 LLC

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of notes (the Notes) issued by Libra Solutions 2024-1 LLC (the Issuer):

CREDIT RATING RATIONALE/DESCRIPTION
-- Overcollateralization, subordination, and a fully funded Reserve Account provide credit enhancement levels that are commensurate with the credit ratings on the Notes. Credit enhancement levels are sufficient to support Morningstar DBRS-projected expected cash collection assumptions under various stress scenarios.
-- 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 credit rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal by the Legal Final Payment Date. The credit rating on the Class B Notes addresses the ultimate payment of interest and the ultimate payment of principal by the Legal Final Payment Date.
-- The full-turbo feature included in the transaction provides further protection for the Notes. To the extent that cash flow is stronger earlier in the transaction's life, significant principal paydown may occur prior to potential future cash flow deterioration.
-- Libra Solutions Intermediate Holdco, LLC experience as an originator in the Litigation Receivables and Medical Receivables business with an acceptable servicer.
-- Morningstar DBRS applies stresses to the expected case to reflect the variability of cash multiples.
---- The stresses are determined based on the originator's historical variability in collections, which is measured by the coefficient of variation, and translated into haircuts to be applied to the expected case via a lognormal distribution.
---- Expected cash collections were determined based on a worst-case pool mix for each month of the Reinvestment Period and tested through cash flow scenarios.
-- Advances are most often repaid by insurance companies, many of which carry strong ratings.
-- Morningstar DBRS determined a worst-case insurance company pool by creating a least diversified composition and assigning an "A" rating to those insurance companies as close to the minimum limitation as possible. For all other insurance companies in the worst-case pool, a rating of B was applied when analyzing its probability of default.
---- In order to assess insurance carrier risk, Morningstar DBRS used its proprietary model, the DBRS CLO Insight Model, to estimate losses at different statistical confidence intervals that correspond to a given rating level. The loss levels generated by the DBRS CLO Insight Model are applied to reduce the transaction cash flow as a stress.
-- The credit quality of the collateral.
-- The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, "Baseline Macroeconomic Scenarios for Rated Sovereigns: September 2024 Update," published on September 25, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with Libra, that the trust has a valid first-priority security interest in the assets, and consistency with Morningstar DBRS' Legal Criteria for U.S. Structured Finance.

Morningstar DBRS' credit rating on the Class A and Class B Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related interest payment amounts, and accrued and unpaid interest from prior interest periods for both the Class A and Class B Notes, interest on any accrued and unpaid interest on the Class B Notes, and the outstanding principal amount on the Class A and Class B Notes.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, interest on any accrued and unpaid interest on the Class A 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.

ENVIRONMENTAL, SOCIAL, AND 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 Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in US Dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating U.S. Structured Finance Transactions (Appendix XI: U.S. Consumer Litigation Finance) (August 6, 2024) https://dbrs.morningstar.com/research/437571.

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.

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.

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.

CLO Insight Model v1.0.1.2 (September 19, 2024)
https://dbrs.morningstar.com/research/439759

Operational Risk Assessment for U.S. ABS Originators and Servicers (August 6, 2024)
https://dbrs.morningstar.com/research/437545

Legal Criteria for U.S. Structured Finance (April 15, 2024)
https://dbrs.morningstar.com/research/431205

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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