Morningstar DBRS Places Three Novation Structured Settlements Transactions Under Review with Negative Implications

DBRS, Inc. (Morningstar DBRS) placed three credit ratings Under Review with Negative Implications from three Novation structured settlements transactions.

The credit rating actions are based on the following analytical considerations:

-- The transactions' performance to date, with zero to minimal defaults and zero losses, which has resulted in increasing credit enhancement levels for all outstanding notes across the transactions.

-- However, the notes have been placed on Under Review with Negative Implications due to the expected servicing transfer from SuttonPark Servicing LLC to Vervent Inc. Furthermore, Morningstar DBRS received notification of a potential event of default or servicer default due to the failure by SuttonPark to provide certain audited and unaudited financial statements as well as the Independent Accountants' Reports. However, the noteholders have not declared an event of default and the transactions continue to amortize within the original performance expectations. Morningstar DBRS will continue to monitor the expected servicing transfer and evaluate any impact on collateral performance and collections available to each transaction to resolve the URN designation. Morningstar DBRS continues to maintain dialogue with the restructuring agent to keep apprised of progress and timing of these operational transfers and collateral performance.

-- The generally high credit quality of annuity providers and their improved capitalization positions and risk-management frameworks, which have been enhanced since the global financial crisis of 2008-09.

-- The transactions' capital structure and the significant seasoning of each transaction to date.

-- The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios For Rated Sovereigns December 2024 Update, published on December 19, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (January 10, 2025) https://dbrs.morningstar.com/research/445740.

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.

These are solicited credit ratings.

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

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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 Originators and Servicers (December 5, 2024),

https://dbrs.morningstar.com/research/444162

-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064

-- Rating U.S. Structured Finance Transactions (November 18, 2024),
https://dbrs.morningstar.com/research/443136

-- Rating U.S. Structured Settlements Asset-Backed Securitizations (October 28, 2024),
https://dbrs.morningstar.com/research/441881

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