KBRA Assigns Preliminary Ratings to Upstart Securitization Trust 2018-1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Upstart Securitization Trust 2018-1 (“UPST 2018-1”). This is a $227.211 million consumer loan ABS transaction that is expected to close on April 13, 2018.

This transaction is Upstart Network, Inc.’s (“Upstart” or the “Company”) third 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 132,000 loans for over $1.66 billion. The Company uses a hybrid funding model which provides an alignment of interest between investors, Upstart and CRB whereby approximately 60% to 70% of the loans are sold to institutional investors, 15% to 25% 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 71.29% for the Class A notes, 48.09% for the Class B notes, 29.93% for the Class C and 10.23% for the Class D notes. The reserve account will be funded at closing in the amount of 0.50% of the of the cutoff loan balance. 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.

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 2018-1 Pre-Sale Report, which was published today at www.kbra.com.

Preliminary Ratings Assigned: Upstart Securitization Trust 2018-1

Class     Preliminary Rating    

Expected Initial Class
Principal

A     A- (sf)     73,513,000
B     BBB- (sf)     58,408,000
C     BB- (sf)     45,694,000
D     B- (sf)     49,596,000
       

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available here.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Kroll Bond Rating Agency
Analytical:
William Carson, 646-731-2405
Senior Director
wcarson@kbra.com
or
Haksun Kim, 646-731-2412
Director
hkim@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com
or
Michael Polvere, 646-731-3339
Analyst
mpolvere@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical:
William Carson, 646-731-2405
Senior Director
wcarson@kbra.com
or
Haksun Kim, 646-731-2412
Director
hkim@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com
or
Michael Polvere, 646-731-3339
Analyst
mpolvere@kbra.com