KBRA Assigns Preliminary Ratings to Upgrade Receivables Trust 2019-1

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four
classes of notes issued by Upgrade Receivables Trust 2019-1 (“UPGR
2019-1” or the “Issuer”). This is a $226.915 million consumer loan ABS
transaction that is expected to close February 21, 2019.

This transaction represents the second ABS securitization collateralized
by unsecured consumer loans originated through the online marketplace
lending platform operated by Upgrade, Inc. (“Upgrade”) and the first in
2019 from the Upgrade Receivables Trust (“UPGR”) shelf. Upgrade
Receivables Trust 2019-1 will issue four classes of notes totaling
$226.915 million. The proceeds from the sale of the notes will be used
to purchase the loans and related rights from Upgrade Receivables
Depositor LLC (the “Depositor”), who purchased the loans from the
transferors, to fund the reserve account and to pay transaction
expenses. The Depositor will in turn sell the loans to the Issuer.

Established in May 2016, with the first loan originated in April 2017,
Upgrade operates an online marketplace lending platform (www.upgrade.com)
(the “Platform”). Upgrade was co-founded by Renaud Laplanche, co-founder
and former CEO of LendingClub Corporation, along with former LendingClub
employees. The Platform offers fixed rate, fully amortizing unsecured
consumer loans with original balances ranging from $1,000-$50,000 and
original terms of three years and five years. These loans are
categorized within three segments based on certain credit-grading
criteria: Prime Plus, Prime, and Near Prime. The loans on the Platform
are originated by WebBank. Generally, the primary purpose of the loan is
debt consolidation. Since inception the Platform has facilitated over
$1.4 billion in loans with over 100,000 borrowers served. Upgrade has
raised $145 million in total equity by investors including CreditEase,
VY Capital, Union Square Ventures and Sands Capital. Upgrade’s total
Stockholder’s Equity as of September 30, 2018 was $62 million.

The transaction has initial credit enhancement levels of 42.50% for the
Class A Notes, 32.65% for the Class B Notes, 19.75% for the Class C
Notes and 6.85% for the Class D Notes. Credit enhancement consists of
excess spread, overcollateralization, subordination (in the case of the
Class A, Class B, and Class C Notes) and a reserve account funded at
closing.

KBRA applied its Global Consumer Loan ABS Rating Methodology as part of
its analysis of the transaction’s underlying collateral pool, the
proposed capital structure and Upgrade’s historical gross loss data.
KBRA also conducted an operational assessment of the Platform, as well
as a review of the transaction’s legal structure and transaction
documents. KBRA will also review the operative agreements and legal
opinions for the transaction prior to closing.

 

Preliminary Ratings Assigned: Upgrade Receivables Trust 2019-1

         
Class   Preliminary Rating   Expected Initial Class Principal
A   A (sf)   $140,534,000
B   BBB (sf)   $23,867,000
C   BB (sf)   $31,257,000
D   B- (sf)   $31,257,000
   

To access ratings, reports and disclosures, click here.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
designated as a designated rating organization by the Ontario Securities
Commission for issuers of asset-backed securities to file a short form
prospectus or shelf prospectus, is recognized by the National
Association of Insurance Commissioners as a Credit Rating Provider, and
is a certified Credit Rating Agency (CRA) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.

Contacts

Analytical Contacts:
Alla
Mikhalevsky, CFA, Associate Director
(646) 731-3356
amikhalevsky@kbra.com

Brendan Carter, Associate
(646) 731-3315
bcarter@kbra.com

Eric Neglia, Managing Director
(646) 731-2456
eneglia@kbra.com

Rosemary Kelley, Senior Managing Director
(646) 731-2337
rkelley@kbra.com