KBRA Assigns Preliminary Ratings to Upstart Securitization Trust 2017-2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Upstart Securitization Trust 2017-2 (“UPST 2017-2”). This is a $175.059 million consumer loan ABS transaction that is expected to close on November 21, 2017.

This transaction is Upstart Network, Inc.’s (“Upstart” or the “Company”) second securitization of prime and near prime unsecured consumer loans. The loans are facilitated by Upstart’s proprietary models supporting an online marketplace that connects borrowers and investors by offering consumer loans originated by Cross River Bank (“CRB”) through the platform, www.upstart.com (the “Upstart Platform” or the “Platform”). Upstart is a wholly-owned subsidiary of Upstart Holdings, Inc.

Upstart was founded in February 2012 and since the first unsecured consumer installment loan was issued in May 2014, has issued over 90,000 loans for over $1 billion. Upstart places loans originated through the Platform using a random allocation process whereby approximately 65% of the loans are sold to institutional investors, 20% retained by Upstart Loan Trust, 5% sold to fractional retail investors and up to 10% retained by CRB.

The transaction has initial hard credit enhancement levels of 58.75% for the Class A notes, 40.20% for the Class B notes and 20.65% for the Class C notes. The reserve account will be funded at closing in the amount of 0.50% of the original loan. The transaction includes a cumulative net loss amortization trigger, which if breached, will cause the transaction to enter a full turbo amortization while the trigger is in breach. The transaction also has a subordinate lockout feature in which no payments will be made to the residual holder prior to and excluding the August 2018 distribution date and all excess cash flow will go to the pay down the class A notes and fund the required overcollateralization amount.

KBRA applied its Consumer Loan ABS Rating Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and Upstart’s historical gross loss data. KBRA also conducted an operational assessment of the Upstart platform, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.

For complete details on the analysis, please see KBRA’s Pre-Sale Report, Upstart Securitization Trust 2017-2 Pre-Sale Report, which was published today at www.kbra.com.

Preliminary Ratings Assigned: Upstart Securitization Trust 2017-2

Class       Preliminary Rating      

Expected Initial Class
Principal

A       A- (sf)       $91,531,000
B       BBB- (sf)       $40,668,000
C       BB- (sf)       $42,860,000
           

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Analytical:
Kroll Bond Rating Agency
William Carson, 646-731-2405
Senior Director
wcarson@kbra.com
or
Lenny Giltman, 646-731-2378
Managing Director
lgiltman@kbra.com
or
David Shin, 646-731-2459
Associate
dshin@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com
or
Haksun Kim, 646-731-2412
Director
hkim@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
William Carson, 646-731-2405
Senior Director
wcarson@kbra.com
or
Lenny Giltman, 646-731-2378
Managing Director
lgiltman@kbra.com
or
David Shin, 646-731-2459
Associate
dshin@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com
or
Haksun Kim, 646-731-2412
Director
hkim@kbra.com