SuttonPark Capital is preparing its third structured settlement securitization, according to DBRS.
The transaction, SuttonPark Structured Settlements 2016-1, will issue two tranches of notes: $208.13 million of senior notes are provisionally rated triple-A and $21.78 million of subordinate notes are provisionally rated triple-B. Both tranches have an expected maturity of 2044 and a legal, final maturity of 2070.
Those are the same ratings that DBRS assigned to comparable tranches of a recent structured settlement deal from J.G. Wentworth.
A structured settlement is an arrangement resolving a claim by with periodic payments, rather than a lump sum. Claimants who are unhappy with the terms, or simply change their mind, may sell rights to the future payments in exchange for a lump sum. Approximately $6 billion of structured settlements are issued each year in the United States. SuttonPark purchases both court-ordered structured settlements and lottery settlements, bundling them into collateral for bonds. Since 2009, it has purchased over $1.16 billion. There have been no losses on these payments to date.
The collateral for this transaction consists primarily of structured settlements related to personal injury, or 94.28%; lotteries account for 5.72%. To date, only 70% of the collateral has been acquired; the sponsor has 90 days after the transaction closes to acquire the remaining $68.97 million.
SuttonPark Servicing will act as the Servicer; PFSC will act as backup servicer for the life of the transaction. Wells Fargo Bank will act as trustee.
Among DBRS’ primary rating considerations are SuttonPark’s experience as an undewriter and the credit quality and diversity of the insurers of the insurers proving the settlements. The company was founded in 2010 and was originally a unit of PennantPark Investment Corp., a business development corporation. In September 2015, it was spun off through a management buyout. For the 12-months ending Sept. 30, 2016, the company purchased over $343 million of guaranteed structured settlements, and its affiliates serviced over $35 million of future payments.
The settlements in this transaction are backed by a diverse and highly rated carrier group. The weighted average rating of the group is approximately A (high), and 92.38% is from entities rated BBB or higher. The highest exposure is to settlements from Metropolitan Life Insurance, 14.7%, Prudential Insurance, 9.44%, American General Life Insurance, 7.8%, Symetra Life Insurance, 6.45%, and New York Life Insurance, 5.28%. No single provider rated below BBB represents more than 2.59% of collateral.