OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has placed the debt ratings on three tranches of securities issued by 321 Henderson Receivables V LLC (Series 2008-3) (the issuer), a special purpose Nevada limited liability company, under review with negative implications. The rating actions were taken on the $74,646,000 Class A-1 8.00% Fixed Rate Asset Backed Notes, Series 2008-3; the $9,389,000 Class A-2 8.00% Fixed Rate Asset Backed Notes, Series 2008-3; and the $4,695,000 Class B 10.00% Fixed Rate Asset Backed Notes, Series 2008-3.
The issuer was formed for the purpose of acquiring settlement receivables from an affiliate, conducting activities required for the maintenance and servicing of the receivables, creating trust and/or other entities for the purpose of securitizing the receivables, issuing securities related to the securitization and other activities incidental to the performance of the aforementioned items.
Proceeds from the issuance of the notes, along with contributed equity capital were used to purchase a pool of settlement and annuity receivables (receivables) from the affiliate and to fund the initial reserve requirement. The initial pool of receivables consisted of 1,844 totaling $189,169,244.16 in payment obligations from 107 annuity providers (i.e., insurance companies). Substantially all of the receivables were derived from the purchase of structured settlements payment streams (Series 2008-3 settlement receivables) and were pursuant to a court order issued in strict compliance with state statutes setting forth explicit procedures for the transfer of claimants’ rights. A structured settlement describes an arrangement between a claimant and a defendant, which results in compensation to the claimant who has settled a claim, primarily arising from a personal injury lawsuit with the defendant. The compensation arrangement provides for a payment to be received by the claimant over time, usually in the form of an annuity payment issued by an insurance company. The settlement receivable represents the purchase of all or a portion of the claimant’s rights to receive scheduled settlement payments, thereby providing liquidity to claimants whose structured settlements no longer meet their particular life circumstances.
The rating action was attributed to the fact that the Superintendent of Insurance of the State of New York has petitioned (dated August 31, 2011) the Supreme Court of the State of New York County of Nassau for an Order of Liquidation and Approval of a Restructuring Agreement for Executive Life Insurance Company of New York (ELNY), a life insurance carrier, who issued annuities intended to cover payments to claimants under the structured settlements. Those payments were subsequently purchased by the issuer. A.M. Best believes that the Liquidation and the Restructuring Agreement indicates that ELNY’s ability to meet its ongoing contract obligations will be diminished.
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The principal methodology used in determining these ratings is “Securitization of Period-Certain and Life-Contingent Structured Settlements.” Additional key criteria utilized include: Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Methodologies can be found at www.ambest.com/ratings/methodology.
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