Affirm, one of the largest providers of point-of-sale unsecured consumer loans, is sponsoring another securitization, hoping to sell $406.6 million to investors through a transaction called Affirm Asset Securitization Trust 2023-X1.
The company is known for facilitating the installment payment options at many e-commerce checkouts, from apparel to airline tickets. After loading up their carts and bags, consumers can opt to have payments debited at regular intervals until the balance is paid. The company maintains an omnichannel credit network, partnering with more than 254,000 merchants and supported more than 16.5 million active consumers. The company's core products are non-revolving, unsecured and fully amortizing, according to DBRS Morningstar.
Cross River Bank, Celtic Bank, Affirm Loan Services and Lead Bank originated the loans, while Affirm is listed as the seller, DBRS said. All of the notes, classes A, B, C and D have a Nov. 15, 2028 final scheduled payment date. The rating agency said the deal is slated to close on November 16.
DBRS expects to assign ratings of 'AAA', 'AA', 'A' and 'BBB' to the A, B, C and D tranches. The rating agency says the notes benefit from subordination, overcollateralization, a reserve account and excess spread. DBRS also says Affirm's ability as a servicer as a positive consideration to the notes, as well as Nelnet Servicing's role on the deal as a backup servicer.
Affirm AST 2023-X1 will repay investors through a sequential-pay structure. The class B notes will not receive any principal until the class A notes are paid in full, and the same process applies to every subsequent tranche of notes through class D.
DBRS also noted that its expected-case cumulative net loss assumption includes stress from further fallout from the COVID-19 pandemic, resulting in an expected loss rate of 5.58%.
In drilling down to the collateral pool, DBRS found that wherever ALS originated loans it did so utilizing state licenses, including such states as Iowa and Virginia, and it makes the loans within each state's usury limit. Affirm also has a supervised lending license to operate in Colorado, allowing it to facilitate supervised loans more than the Colorado annual rate cap of 12%.
Affirm was founded by a group that included PayPal's founding chief technology officer. As of June 30, the group had partnered with about 254,000 merchants and supported about 16.5 million active users and has generated about $44 billion in gross merchandise volume over the last three years.
