Pagaya Structured Products is preparing to sponsor a $267.7 million securitization, backed by a pool of cash flows from auto loans.
The sponsor is an entity of Pagaya Technologies, an Israeli-based financial technology company that makes loan origination decisions using artificial intelligence and machine learning. All of the collateral loans in Research-Driven Pagaya Motor Asset Trust, 2023-3, or RPM 2023-3 as the deal is known, are whole loans, according to research analysts from Kroll Bond Rating Agency. The deal has a three-month pre-funding period, during which it will purchase loans from about 11 lenders, including Ally Bank, Automotive Credit, Consumer Portfolio Services and First Help Financial.
Pagaya's origination models use a proprietary credit technology to score loan applicants based on a risk-adjusted expected return scale, KBRA said. The rating agency was the only one to assign ratings to the notes at press time, according to the Asset Securitization Report's deal database.
RPM 2023-3 will issue four classes of notes, which will repay investors through a sequential pay structure that will repay the class A noteholders before all subordinate notes. Once the class A notes are repaid in full class B will receive payments until fully paid, and the order of payment will follow that structure until the class D notes are paid in full. This form of subordination also provides some credit enhancement to the notes.
The notes also benefit from a step-up event concerning the class D notes, KBRA said. If an optional redemption does not occur in the expected redemption date, then the interest rate on the class D notes will increase by 3.0%.
A reserve account, which includes the capitalized interest amount, is funded at closing in an amount equal to $5.96 million, or about 1.71% of the prefunded pool balance. The deal also benefits from gross excess spread before losses is about 8.56%, based on a weighted average collateral interest rate of 20.0%, minus the 3.50% servicing fee and a weighted average life adjusted note coupon of 7.94%.
KBRA expects to assign ratings of 'A' to the class A notes; 'BBB' to the class B notes; 'BB' to the class C notes and 'B' to the class D notes.
