NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to the Citi Held for Asset Issuance 2016-PM1 notes:
--Class A notes 'A-sf'; Outlook Stable;
--Class B notes 'BBB-sf'; Outlook Stable;
--Class C notes 'Bsf'; Outlook Stable.
KEY RATING DRIVERS
Adequate Collateral Quality: The 2016-PM1 trust pool consists of 100% unsecured, fixed-rate, fully amortizing, consumer loans that have either 36- or 60-month original loan terms, as well as originated and serviced on Prosper's marketplace online lending platform. The pool exhibits a weighted average FICO score of 704 and a weighted average borrower rate of 13.57%.
Sufficient Credit Enhancement and Liquidity Support: The initial hard credit enhancement (CE) for class A, B and C is expected to be 33.00%, 25.10% and 12.00%, respectively. Liquidity support is provided by a non-declining reserve account, which will be fully funded at closing at 0.50% of the initial pool balance. Transaction cash flows were satisfactory under all stressed scenarios, commensurate with the ratings.
Untested Performance through a Full Economic Cycle: Loans originated and serviced via online platforms, such as Prosper's, do not yet have a performance history through a recessionary environment. Furthermore, as the underlying consumer loans are unsecured and primarily intended for debt consolidation, Fitch expects borrowers to treat paying down these loans as a lower priority relative to other borrowings, such as an auto loan or a mortgage. As such, the pool could experience especially elevated default frequency in an economic downturn. Fitch placed a rating cap on this transaction of 'Asf'.
Satisfactory Servicing Capabilities: Prosper will service all the loans in the 2016-PM1 trust, and Citibank, N.A. will act as the backup servicer. Fitch considers the servicing operations of Prosper of consumer loans to be acceptable and Citibank, as a backup servicer, to be effective.
RATING SENSITIVITIES
As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels and/or prepayment speeds than the base case. This will result in a decline in available CE and the remaining loss coverage levels available to the notes. Therefore, note ratings may be susceptible to potential negative rating actions, depending on the extent of the decline in the coverage.
Rating sensitivity results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. Rating sensitivity should not be used as an indicator of future rating performance.
DUE DILIGENCE USAGE
No third party due diligence was provided to or reviewed by Fitch in relation to this rating action.
Key Rating Drivers and Rating Sensitivities are further described in the presale report titled 'Citi Held for Asset Issuance 2016-PM1', dated March 16, 2016, available on www.fitchratings.com, or by clicking on the link.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 28 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781
Global Consumer ABS Rating Criteria (pub. 03 Dec 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874105
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Related Research
Citi Held for Asset Issuance 2016-PM1 -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878955
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001822
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001822
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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