- A.M. Best has upgraded the debt rating to "bb" from "bb-" on the $4,695,000 Class B 10.00% Fixed Rate Asset Backed Notes, Series 2008-3 and affirmed the debt ratings of "aaa" on $74,646,000 Class A-1 8.00% Fixed Rate Asset Backed Notes, Series 2008-3 and $9,389,000 Class A-2 8.00% Fixed Rate Asset Backed Notes, Series 2008-3 of securities issued by 321 Henderson Receivables V LLC (the issuer), a special purpose Nevada limited liability company. The outlook for all 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. The initial pool of receivables consisted of 1,844 contracts totaling $189,169,244.16 in payment obligations from 107 annuity providers (i.e., insurance companies). Nearly all of the receivables were pursuant to a court order. 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. The settlement receivable represents the purchase of all or a portion of the claimant's rights to receive scheduled settlement payments, thereby providing liquidity to claimants whose structured settlements no longer meet their particular life circumstances.
The rating actions reflect qualitative and quantitative considerations including updated default probabilities that were derived from stochastic modeling that incorporated the default probability of the annuity providers maintaining the payment obligations and the recovery rate on the cash flows upon an insurance carrier event of default. The stochastic modeling of the transaction incorporated updates on: (1) issuer credit ratings (ICRs) of the insurance carriers, (2) financial data required for modeling purposes and (3) remaining collateral/payment information including the finalization of the reduced payment obligations of Guaranty Association Benefits Company, a newly formed special purpose not-for-profit captive insurance company and the successor to the liquidated Executive Life Insurance Company of New York.
The ratings could be upgraded or downgraded and/or the outlook revised (i.e., positively or negatively) if material changes occur in the ICRs of the remaining insurance carriers, a reduction in the remaining scheduled payments, an increase in the level of the write-off activity or a breach in ongoing surveillance and/or compliance benchmarks/ratios.
These are structured finance ratings.
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The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at http://ift.tt/1c2LHBC.
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