Best’s News & Research Service - November 03, 2022 04:10 PM (EDT)
AM Best Upgrades Issue Credit Rating of 321 Henderson Receivables V LLC’s Class B Notes
- November 03, 2022 04:10 PM (EDT)
Oldwick //BestWire// - AM Best has upgraded the Long-Term Issue Credit Rating (Long-Term IR) to “a” (Excellent) from “bbb+” (Good) on the $4,695,000 Class B 10.00% Fixed Rate Asset Backed Notes, Series 2008-3, issued by 321 Henderson Receivables V LLC (the issuer), a special purpose Nevada limited liability company. Concurrently, AM Best has affirmed the Long-Term IRs of “aaa” (Exceptional) on the $74,646,000 Class A-1 8.00% Fixed Rate Asset Backed Notes, Series 2008-3 and the $9,389,000 Class A-2 8.00% Fixed Rate Asset Backed Notes, Series 2008-3, issued by 321 Henderson Receivables V LLC. The outlook of these Credit Ratings (ratings) is stable.
The issuer was formed for the purpose of acquiring receivables from an affiliate; conducting activities required for the maintenance and servicing of the receivables; creating trust and/or other entities for the purpose of securitizing the receivables; issuing securities related to the securitization; and organizing other activities incidental to the performance of the aforementioned items.
Proceeds from the issuance of the notes, along with contributed equity capital, were used to purchase a pool of structured settlement and annuity receivables (receivables) from the affiliate and to fund the initial reserve requirement. A structured settlement describes an arrangement between a claimant and a defendant, which results in compensation to the claimant who has settled a claim, primarily arising from a personal injury lawsuit with the defendant. The compensation arrangement provides for a payment to be received by the claimant over time, usually in the form of an annuity payment issued by an insurance company. A settlement receivable represents the purchase of all or a portion of a claimant’s right to receive scheduled settlement payments, thereby providing liquidity to the claimant whose structured settlement no longer meets his/her particular life circumstance. The initial pool of receivables consisted of 1,844 contracts totaling approximately $189.2 million in payment obligations from 107 insurance companies. As of Aug. 31, 2022, the pool of receivables totaled approximately $80.4 million in payment obligations from 66 insurance companies. Nearly all of the receivables were pursuant to a court order.
The Long-Term IR upgrades of the Class B notes reflect the continued improvement of both its credit enhancement and modeled default probability. The overall rating actions reflect qualitative and quantitative considerations, including the transaction’s performance to date, as well as default probabilities that are derived from stochastic modeling that incorporate updates on the Long-Term Issuer Credit Ratings (Long-Term ICRs) of the insurance carriers; the financial data required for modeling purposes; and remaining collateral information, including the reduced payment obligations of Guaranty Association Benefits Company, a not-for-profit captive insurance company formed for making payments to the payees and certificate holders of the liquidated Executive Life Insurance Company of New York.
The ratings and the outlooks could be affected negatively if one or more of the following occurs: a reduction in the remaining scheduled payments; deterioration of the Long-Term ICR of the remaining insurance carriers; an increase in the level of the write-off activity; and a breach in ongoing surveillance or compliance benchmarks. However, the rating and the outlook of the Class B notes could be upgraded if there is significant improvement on the underlying cash flows.
These are structured finance ratings.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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