Morningstar DBRS Finalizes Provisional Credit Ratings on Upgrade Receivables Trust 2024-1

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of notes issued by Upgrade Receivables Trust 2024-1 (Upgrade 2024-1):

-- $150,704,000 Class A Notes at AA (low) (sf)
-- $45,997,000 Class B Notes at A (low) (sf)
-- $37,969,000 Class C Notes at BBB (low) (sf)
-- $35,125,000 Class D Notes at BB (low) (sf)
-- $29,271,000 Class E Notes at B (sf)

CREDIT RATING RATIONALE/DESCRIPTION

The credit ratings on the Notes are based on Morningstar DBRS' review by of the following considerations:

(1) The transaction's form and sufficiency of available credit enhancement.
-- Overcollateralization, subordination, amounts held in the Reserve Fund Account, and excess spread create credit enhancement levels that are commensurate with the credit ratings.
-- Transaction cash flows are sufficient to repay investors under all AA (low) (sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (sf) stress scenarios in accordance with the terms of the Upgrade 2024-1 transaction documents.
-- The transaction provides for Class E Notes with a credit rating of B (sf). While the Morningstar DBRS Rating U.S. Structured Finance Transactions, Appendix I: U.S. Consumer Loan ABS Transactions methodology does not set forth a range of multiples for this asset class for the B (sf) level, the analytical approach for this rating level is consistent with that contemplated by the Methodology. The typical range of multiples applied in the Morningstar DBRS stress analysis for a B (sf) rating is 1.00 times (x) to 1.25x.

(2) The Morningstar DBRS cumulative net loss (CNL) assumption of 16.85% based on the Statistical Cutoff Date pool composition, which is not expected to differ materially from the Cutoff Date pool, and the expected prefunded receivables, which will be subject to a Concentration Test (i.e., a set of collateral concentration limits), which Morningstar DBRS took into consideration when deriving the CNL assumption.

(3) The eligibility criteria and Concentration Test applicable to the additional loan collateral that may be added to the trust during the Prefunding Period, which is expected to total up to 20.00% of the total collateral backing Upgrade 2024-1.

(4) 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 COVID-19 pandemic scenarios, which were first published in April 2020.

(5) Upgrade's experience, sourcing, and servicing capabilities.

(6) The Lending Partners' experience, underwriting, and origination capabilities.

(7) The annual percentage rate (APR) charged on the loans and the status of the Lending Partners as the true lenders.
-- The weighted-average (WA) APR of the loans in the pool is 21.92%.
-- All loans included in Upgrade 2024-1 are originated by CRB or BRB in compliance with the relevant usury limit.
-- Upgrade is obliged to repurchase any loan if there is a breach of a representation and warranty that materially and adversely affects the interests of the purchaser.

(8) Systems & Services Technologies' (SST) ability to perform duties as a Backup Servicer.

(9) The legal structure and presence of legal opinions that address the true sale of the unsecured loans, the nonconsolidation of the trust, that the trust has a valid perfected security interest in the assets, and consistency with the Morningstar DBRS Legal Criteria for U.S. Structured Finance.

Morningstar DBRS' credit ratings on the Notes referenced herein address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the note balance of and accrued interest on the Class A, Class B, Class C, Class D, and Class E Notes, including any unpaid accrued interest from prior distribution dates.

Morningstar DBRS' credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. The associated contractual payment obligations that are not financial obligations are interest on the unpaid accrued interest on the Class A, Class B, Class C, Class D, and Class E Notes from prior distribution dates.

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 I: U.S. Consumer Loan ABS Transactions) (November 18, 2024), https://dbrs.morningstar.com/research/443136/rating-us-structured-finance-transactions

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.
140 Broadway, 43rd Floor
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://dbrs.morningstar.com/about/methodologies.

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 (October 28, 2024),
https://dbrs.morningstar.com/research/441840/legal-criteria-for-us-structured-finance

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.