Pagaya Structured Products' latest securitization of its lending marketplace loans is offering the second-smallest offering of the year, selling $591 million in notes through the Pagaya AI Debt Grantor and Debt Trust, series 2026-5.
Almost all the tranches of notes, A2 through EF, have a legal final maturity of March 15, 2034, say analysts at the Kroll Bond Rating Agency. The A1 notes mature on Aug. 16, 2027, KBRA said.
The PAID 2026-5 is a fully prefunded deal, so no collateral is funded at closing. Instead, the notes are initially supported by amounts deposited into the prefunding account, and during the three-month period the amounts will be used to buy the actual collateral, unsecured consumer loans.
Initial credit enhancement levels on the A1 and A2 notes are 85.90% and 71.09%, respectively, while enhancement levels range from 38.94% to 3.44% from classes B through F2, KBRA said.
PAID 2026-5 will pay interest on classes A1 through F2 sequentially. Principal payments will also be paid sequentially during the first 11 months, as the deal enters full turbo, KBRA said.
After the turbo period—months 12 through 39—classes A2, A2, B, C, D, E and F1 will receive enough principal payments to reach their respective target note balances and stay there. After they achieve that, the deal will use the remaining funds to pay principal to noteholders, starting with investors in the F2 tranche and moving in reverse sequential order.
Although the securitization balance is lower, KBRA put its base case lifetime cumulative net loss expectation at 17.04%, which is higher than the 16.33% it estimated for the PAID 2026-4. The worst case collateral concentration limit is driving this, according to the rating agency.
The entire pool is composed of whole loans, sourced from its platform sellers that include Happen Bank, MF Consumer Loan Trust, SoFi Lending, Cross River Bank, and Prosper Funding, the rating agency said.
For loans other than Rocket Loans, SoFi, U.S. Bank and Upstart Loans, Vervent is on the deal as backup servicer, KBRA said, while Systems Services Technologies is the backup servicer for those loan contracts, the rating agency said.
PAID 2026-5 benefits from an initial overcollateralization level of 1.50% of the amount in the prefunding account as of the closing date. After the prefunding period, and during the full turbo period, the overcollateralization target for each class of notes will be 100%.
KBRA assigns ratings ranging from K1+ on the A1 notes to B- on the EF tranche.
