JG Wentworth’s second securitization of the year has more exposure to court ordered structured settlement and less exposure to annuity payments than its other recent transactions, according to Moody’s Investors Service.
The initial collateral for J.G. Wentworth XLII LLC, Series 2018-2 is 97.4% structured settlements, up from 96.6% for the prior deal and the highest concentration of any deal over the past five years. Annuities account for 2.4% of the collateral, down from 3.4% in the first deal of the year and 4.4% in the third deal of 2017.
The latest deal also includes a very small exposure, 0.1% to lottery receivables, which were not included in the collateral for the past two deals, according to Moody’s. These payments are due from the lottery commission of the State of Indian but are not a direct obligation of the state.
The overall credit quality of the obligors remains strong, with a higher percentage of the pool backed by Aaa-rated obligors and a lower percentage of the pool backed by unrated obligors. The pool is similarly concentrated among the top obligors,
Two classes of notes will be issued in the transaction: $264.1 million of Class A notes are provisionally rated Aaa by Moody’s and benefit from 15% credit enhancement, unchanged from the prior deal; $29.5 million of Class B notes are rated Baa2.
At closing, approximately $138 million of proceeds, or about 47% of total, will be deposited into the prefunding account. The issuer will have 90 business days from the closing date to use these funds to purchase additional receivables that will back the notes.
Among the risks to the deal is exposure to Genworth Life and Annuity Insurance Co.; in February, Moody's downgraded the insurer's financial strength rating to Ba3 from Ba1. It also downgraded Genworth Life Insurance Co. rating to B3 from B2. The outlook for both ratings is negative. Together, they account for around 4.7% of the pool’s discounted receivables balance.
