A.M. Best has upgraded the long-term issue credit rating to “bbb” from “bbb-” on the $4.7 million Class B 10 percent fixed rate asset-backed notes, series 2008-3 issued by 321 Henderson Receivables V, a special purpose Nevada limited liability company.
The outlook of this credit rating has been revised to stable from positive.
In addition, A.M. Best has affirmed the long-term issue credit ratings of “aaa” on the $74.6 million Class A-1 8 percent Fixed Rate Asset-Backed Notes, Series 2008-3 and the $9.3 million Class A-2 8 percent Fixed Rate Asset-Backed Notes, Series 2008-3 issued by 321 Henderson Receivables V LLC.
The outlook of these ratings is stable.
A.M. Best outlined that the issuer was formed to acquire receivables from an affiliate; conduct activities required for the maintenance and servicing of the receivables; creating trust and/or other entities to securitise the receivables; issuing securities related to the securitisation; and organising 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.M. Best explained.
The initial pool of receivables consisted of 1,844 contracts totalling $189.2 million in payment obligations from 107 insurance companies. Nearly all of the receivables were pursuant to a court order.
A.M. Best said: “The upgrade of Class B Notes reflects the improvement of its credit enhancement.”
“The overall rating actions reflect qualitative and quantitative considerations, including default probabilities that are derived from stochastic modelling that incorporates the default probability of the insurance carriers providing the annuity payments and the assumed recovery rate on the cash flows in the event of a carrier default,” the rating firm added.
The modelling of the transaction incorporates updates on long-term issuer credit ratings of the insurance carriers; financial data required for modelling 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.
A.M. Best warned that the ratings and the outlooks could be affected negatively if there is reduction in the remaining scheduled payments, deterioration of the long-term issue credit rating of the remaining insurance carriers, 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 B Notes could be upgraded if there is a significant improvement on the underlying cash flows,” A.M. Best added.
