Unsecured consumer loans will secure $500 million in asset-backed securities issued from the Pagaya AI Debt Trust 2023-1, a deal that is slated to come to market.
The latest issuance includes loans with characteristics that are different from previous issuances, according to a pre-sale report form Kroll Bond Rating Agency. For one, the trust includes loans from a new platform seller, RockLoans Marketplace, commonly known as Rocket loans. Also the PAID 2023-1 will include loans with an original term of 24 and 48 months, the rating agency said.
The current deal has also revised concentration limits when compared with PAID 2022-5. The current deal's worst-case collateral pool can include lower concentrations in loan grades A and B and higher concentrations in loan grades D and E. Grade F loans are not eligible in either case, according to KBRA. Further, the PAID 2023-1 worst-case collateral pool can include a higher concentration of 60-month loans, and a lower concentration of 36-month loans.
PAID 2023-1 will secure the underlying assets for the notes through a three-month pre-funding period, which is shorter than the six-month pre-funding period for 2022-5, and will source the loans from a series of platforms, including LendingClub Bank, MF Consumer Loan Trust, and "Marlette," Prosper Funding.
The trust will repay investors through a sequential pay structure, where the class A notes receive principal payments prior to all subordinate notes. That's just one form of credit enhancement, however, as PAID 2023-1 also benefits from subordination of the junior classes in the capital structure, and a reserve account equal to $10 million or about 2,00% of the prefunded balance.
The deal also benefits from pre-loss gross excess spread of 10.96%, and exchangeable notes. Classes A and B notes can be exchanged for the class AB notes and vice versa.
KBRA is preparing to issue ratings of 'A-' on the class A notes; 'BBB-' on the class B notes; and 'B-' on the class C notes, which the trust will issue to investors. The rating agency intends to assign 'BBB-' to the exchangeable class AB notes, KBRA said. All of the notes have a legal final maturity date of July 15, 2030.
