Personal consumer loan receivables will secure the $300 million in asset-backed securities from Lendmark Funding Trust, 2023-1, in a deal that shortened its revolving period and eliminated class E notes, the most subordinate class from a previous deal.
The deal has several notable differences from the trust's 2022-1 deal, according to S&P Global Ratings. For one, LFT 2023-1 does not include a class E tranche. Also, overcollateralization has increased to 21.00% of the initial adjusted loan principal balance, from 10.35%, according to the rating agency.
Further, the deal has a revolving period of 23 months, shorter than the 35 months on the 2022-1 deal, during this period the trust will pay no principal to the notes.
Among other structural elements, LFT 2023-1 will repay the notes sequentially and features performance-based early amortization triggers linked to a three-month average annualized net loss percentage. The trust will measure that percentage on or after the July 2023 payment date or an overcollateralization test. Other amortization triggers are built in and linked to a drop in the pool's credit or a servicer default.
S&P points to several forms of credit enhancement to bolster the ratings on the notes, including the levels of credit support on each note. Classes A, B, C and D notes benefit from levels of 62.0%, 53.8%, 48.9% and 43.1%, respectively. On a worst-case, weighted average (WA), base-case loss basis, the rating agency expects a loss of about 17.5%. S&P noted that the expected loss level is a function of the transaction-specific reinvestment criteria and loan performances at the Landmark Financial Services level.
S&P expects to assign ratings of 'AAA' to the $199.9 million, class A senior notes and the bulk of the deal; 'AA-' to the class B notes; 'A-' on the class C notes and 'BBB-' on the class D notes.
All of the notes have a legal final maturity of May 20, 2033, the rating agency said.
