Pagaya Technologies' busy year of securitization continues with a $297 million transaction through the Pagaya AI Debt Trust 2023-8, the fifteenth deal from sponsor Pagaya Structured Products, a subsidiary of Pagaya U.S. Holding.
Unsecured consumer loans will make up the collateral pool securing the notes, according to ratings analysts at Kroll Bond Rating Agency. PAID 2023-8 will repay interest to classes A through F noteholders sequentially. As for principal, the structure will repay enough on the classes A, B and C to maintain their respective target note balance, and after that point the trust will use the remaining funds to repay principal amounts sequentially on classes D through F.
PAID 2023-8 also includes a provision for an amortizing event, where a cumulative net default would trigger principal payments on classes A through F, sequentially, KBRA said.
All of the notes have a legal final maturity date of June 16, 2031, while the classes A, B, C, D, E, and F have initial credit enhancement levels of 67.25%, 49.00%, 33.50%, 17.90%, 8.55% and 1.50%, respectively, KBRA said. The structure also includes a set of exchangeable notes.
KBRA says it expects to assign ratings of 'AA' to the class A notes; 'A-' to the class B and AB notes. The class C and class ABC notes earned 'BBB-' ratings; the class D notes earned 'BB-' notes; and the classes E and DE notes earned 'B-' ratings, KBRA said.
PAID 2023-8 has a two-month prefunding period, which will be used to purchase unsecured consumer loans, as long as certain concentration limits and eligibility criteria. Pagaya, which uses machine learning and big data analytics to set lending parameters and make lending decisions, partners with a roster of lending partners. This deal contains loans from partners that originate, sell and service the loans, including LendingClub Bank, MF Consumer Loan Trust, Prosper Funding, Avant, Upgrade, SoFi Lending, RockLoans Marketplace and Cross River Bank.
Other structural elements in the deal shore up credit to the notes, including a reserve account equal to about $4 million. During PAID 2023–8's pre-funding period, the reserve account amount
Will equal 0.50% of the sum of deposits, KBRA said. Excess spread will also provide credit enhancement, which will amount to 11.95%.
