OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Long-Term Issue Credit Rating (Long-Term IR) to “bbb” from “bbb-” on the $4,695,000 Class B 10.00% Fixed Rate Asset Backed Notes, Series 2008-3 issued by 321 Henderson Receivables V LLC (the issuer), a special purpose Nevada limited liability company. The outlook of this Credit Rating (rating) has been revised to stable from positive. Concurrently, AM Best has affirmed the Long-Term IRs of “aaa” on the $74,646,000 Class A-1 8.00% Fixed Rate Asset Backed Notes, Series 2008-3 and the $9,389,000 Class A-2 8.00% Fixed Rate Asset Backed Notes, Series 2008-3 issued by 321 Henderson Receivables V LLC. The outlook of these ratings is stable.
The issuer was formed for the purpose of acquiring 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 organizing 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 structured settlement and annuity receivables (receivables) from the affiliate and to fund the initial reserve requirement. The initial pool of receivables consisted of 1,844 contracts totaling $189,169,244.16 in payment obligations from 107 insurance companies. Nearly all of the receivables were pursuant to a court order. 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. A settlement receivable represents the purchase of all or a portion of a claimant’s right to receive scheduled settlement payments, thereby providing liquidity to the claimant whose structured settlement no longer meets his/her particular life circumstance.
The upgrade of Class B Notes reflects the improvement of its credit enhancement. The overall rating actions reflect qualitative and quantitative considerations, including default probabilities that are derived from stochastic modeling that incorporates the default probability of the insurance carriers providing the annuity payments and the assumed recovery rate on the cash flows in the event of a carrier default. The modeling of the transaction incorporates updates on: (1) Long-Term Issuer Credit Ratings (Long-Term ICRs) of the insurance carriers; (2) financial data required for modeling purposes; and (3) remaining collateral information, including the reduced payment obligations of Guaranty Association Benefits Company, a not-for-profit captive insurance company formed for making payments to the payees and certificate holders of the liquidated Executive Life Insurance Company of New York.
The ratings and the outlooks could be affected negatively if one or more of the following occurs: a) reduction in the remaining scheduled payments, 2) deterioration of the Long-Term ICR of the remaining insurance carriers, 3) increase in the level of the write-off activity, and 4) a breach in ongoing surveillance or compliance benchmarks. However, the rating and the outlook of the B Notes could be upgraded if there is significant improvement on the underlying cash flows.
These are structured finance ratings.
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