Pagaya Structured Products is sponsoring a $586.2 million asset-backed securities deal, with cashflows from unsecured consumer loans securing the repayment of the outstanding notes.
Almost all the 15 classes of notes have a legal final maturity date of Nov. 15, 2033, except the A1 tranche, which has a legal final maturity date of April 15, 2027, according to Kroll Bond Rating Agency.
The offering, through issuers Pagaya AI Debt Grantor Trust 2026-2 and Pagaya AI Debt Trust 2026-2, is expected to close on April 1, according to KBRA.
PAID 2026-2's A1 tranche of notes benefit from credit enhancement levels of 80.36%, and the A2 notes have credit enhancement at a 64.63% level, KBRA said.
Whole loans make up all the collateral, and they were sold into the pool from a group of 11 partner lenders, including LendingClub Bank, MF Consumer Loan Trust and Prosper Funding Avant, the rating agency said. Although the lenders vary, the platforms use Pagaya's proprietary credit technology to assess borrowers' credit worthiness.
Classes A1 through F2 will repay interest to noteholders sequentially. Before an amortization event, principal payments will enter full turbo during the deal's first 12 months. All available funds will be used to pay down the outstanding notes in a sequential order.
During months 13 through 39 classes A1, A2, B, C, D, E and F1 will receive principal payments necessary to achieve and maintain their respective target note balance. After that, the remaining funds will be used to pay principal to the class F2 notes and then to the remaining classes of notes in reverse sequential order.
Another important part of the structure is a cumulative net default amortization trigger. If the trigger is breached, principal payments to class A1 through F2 will be made sequentially.
In other credit supports, Pagaya benefits from subordination, overcollateralization equaling 2.30% of the amount of in the prefunding account, and two reserve accounts.
A static account is the lesser of 0.15% of the balance of the prefunding account as of the closing date and $0.90 million. Also, a dynamic reserve account will be funded to an amount equal to about $9.45 million.
KBRA assigns ratings of K1+ to the A1 notes; AAA to the A2 notes; AA- to the class B notes; A- to the class C notes; BBB-to the class D notes; BB- to the class E notes; B+ to the F1 notes; B- to the F2 notes among other ratings.
