Upgrade Receivables Trust, 2024-1, is preparing to issue $299 million in asset-backed securities to investors, secured by revenue from unsecured consumer loans originated through Upgrade's lending partners.
This will be Upgrade's fourth sponsored transaction and the first of the year. Structured as a Rule 144A transaction, Upgrade Receivables will sell the notes through five classes of A, B, C, D and E notes, according to Morningstar | DBRS.
Initially, the notes benefit from credit enhancement, which includes a reserve fund that equals 0.50% of the pool balance, according to DBRS. Also, the notes benefit from overcollateralization, which represents 10.60% of the pool balance, as of the cutoff date; and subordination.
All the notes are fixed rate, the rating agency said. After the deal's expected closing date of Nov. 27, 2024, the transaction will begin repaying noteholders on Feb. 17, 2025 and the notes bear the same final maturity date, Feb. 18, 2031.
On a cumulative net loss basis, DBRS assumes a loss of 16.85%, based on the pool's composition. Cross River Bank and Blue Ridge Bank originated the loans in the pool, DBRS said. On a weighted average (WA) basis, the loans had an annual percentage rate (APR) of 21.92%. Also, Upgrade is obliged to repurchase any loan if there is a breach of a representation and warranty that would severely impact the purchaser's interests.
BNP Paribas and Barclays Capital are the notes' initial purchasers, DBRS said.
The rating agency assigns AA, A, BBB, BB and B to the A, B, C, D and E notes, respectively.
