Approximately $57.8 million securities rated
On December 12, 2017, the press release was corrected as follows: due to an internal administrative error, the wrong version of the press release was initially published. The press release has now been corrected. Revised release follows.
New York, December 11, 2017 -- Moody’s Investors Service (“Moody’s”) has assigned provisional ratings to two classes of notes to be issued by J.G. Wentworth XL LLC (the issuer), an indirect wholly owned subsidiary of J.G. Wentworth Originations LLC (the sponsor; unrated). The notes will be backed by a pool of structured settlement payments and assignable annuity streams.
The complete rating actions are as follows:
Issuer: J.G. Wentworth XL LLC, Series 2017-3
$51,867,000 Class A Fixed Rate Asset Backed Notes,
Assigned (P)Aaa (sf)
$5,966,000 Class B Fixed Rate Asset Backed Notes,
Assigned (P)Baa2 (sf)
RATINGS RATIONALE
The ratings on the notes are based on (1) Moody's assessment of the strength of the court-ordered structured settlement payment streams and annuity receivables; (2) the credit quality of the obligors; (3) the servicing arrangement; and (4) the structural and legal aspects of the transaction. The structure of this securitization will be very similar to that of the sponsor's previous transactions, except this deal will not include a prefunding account to be used to purchase additional receivables after the closing date.
The main driver of credit risk in this transaction is the obligor base. As in the sponsor's previous securitizations, the pool will contain obligors that are primarily highly rated life insurance companies, of which around 74.1% (based on the present value of the securitized receivables) have a Moody's insurance financial strength rating of A3 or higher.
The issuer's assets will include (1) court-ordered structured settlement payments of around 95.6% of the present value of the receivables and annuity receivables of around 4.4% of the present value of the receivables; (2) a reserve account in the amount of $611,993.
The servicing arrangement reduces the risk of a servicing disruption. J.G. Wentworth Management Company, LLC (JGW Management; unrated) will act as the master servicer. In addition, Portfolio Financial Servicing Company (PFSC; unrated) will act as the back-up servicer. We believe that servicing disruption risk is adequately mitigated by US Bank National Association (U.S. Bank; Aa1 stable, P-1, aa3), as the trustee, assuming responsibility for finding a successor servicer. If US Bank is unable to find a successor servicer, then it will act as the master servicer.
The transaction will have a turbo structure in which the trustee acting as paying agent will distribute all collections, net of certain fees and expenses, to, first, pay interest payments on the notes and, second, pay down the notes' outstanding principal balance until repaid in full.
The Class A notes will benefit from 15.25% subordination (as a percentage of the assets) provided by the Class B notes (9.75%) and issuer interest (5.50%). The subordination is expected to increase over time as the Class B notes will not receive any principal payments in the first 48 months after the transaction closing date and the issuer interest will not receive any principal until the Class A and Class B notes are repaid in full. The 15.25% subordination supporting the Class A notes in this transaction is lower than the 15.75% supporting the Class A notes in the 2017-2 transaction as a result of the stronger credit quality of the pool.
The Class B notes will benefit from 5.50% subordination provided by the issuer interest. In addition, the ratings of the Class B notes take into account that Class B noteholders will not receive principal payments in the first four years of the transaction, as well as the possibility that payments to the Class B noteholders could cease until the Class A notes are repaid in full if the transaction breaches certain collateral performance triggers.
Finally, the notes benefit from a non-declining reserve account equal to 1.00% of the initial present value of the receivables.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating Transactions Backed by Structured Settlements" published in
May 2015. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
An upgrade of the Class B notes is unlikely in the near term owing to the fact that the Class B noteholders will not receive principal payments in the first four years of the transaction, and the possibility that payments to the Class B noteholders could cease until the Class A notes are repaid in full if the transaction breaches certain collateral performance triggers.
Down
Moody's could downgrade the ratings of the notes if the credit quality of the obligors, which are primarily life insurance companies, was to deteriorate significantly, as reflected by a downgrade of one or more of the obligors' credit ratings.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1104049
The analysis relies on a Monte Carlo simulation that generates a large
number of collateral loss or cash flow scenarios, which on average
meet key metrics Moody's determines based on its assessment of the
collateral characteristics. Moody's then evaluates each simulated
scenario using model that replicates the relevant structural features
and payment allocation rules of the transaction, to derive losses
or payments for each rated instrument. The average loss a rated
instrument incurs in all of the simulated collateral loss or cash flow
scenarios, which Moody's weights based on its assumptions
about the likelihood of events in such scenarios actually occurring,
results in the expected loss of the rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Gideon Lubin
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Tracy Rice
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
