Kroll Bond Rating Agency (KBRA) assigns a preliminary rating to one class of notes from PEAR 2020-1, LLC, an $80 million litigation finance ABS transaction serviced by Golden Pear Funding OpCo, LLC (“Golden Pear”).
The PEAR 2020-1, LLC transaction represents Golden Pear’s first ABS collateralized by litigation finance receivables. Golden Pear is a litigation finance company that conducts business throughout the US but is concentrated primarily in the New York area. As of June 30, 2020, the company has funded over $626 million in aggregate advances dating back to 2008.
The portfolio securing the transaction has an aggregate discounted receivable balance (“ADPB”), including assumed prefunding, of approximately $108 million as of the October 30, 2020 cutoff date. The ADPB is the aggregate discounted cash flows of the collections associated with the PEAR 2020-1, LLC portfolio’s litigation funding receivables. The discount rate used to calculate the ADPB is a percentage equal to the sum of the assumed interest rate on the notes, the servicing fee rate of 1.00%, and an additional 0.10%. As of the cutoff date, the receivables comprise pre-settlement litigation funding receivables with an average advance to expected settlement case value of approximately 13%. No post-settlement advances or medical lien receivables are included in the pool.
The notes benefit from credit enhancement in the form of overcollateralization, a cash reserve account and a capitalized interest account. The transaction also features a $15 million prefunding account that may be used to purchase additional receivables during the three months after closing, subject to certain eligibility criteria.
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Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
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Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
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