PLEASE READ AND SCROLL DOWN!
By clicking “I AGREE”, you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s information that becomes accessible to you (the “Information”). References herein to “Moody’s” include Moody’s Corporation. and each of its subsidiaries and affiliates..
Terms of One-Time Website Use
1. Unless you have entered into an express written contract with www.moodys.com to the contrary and/or agreed to the Terms of Use at www.moodys.com or ratings.moodys.com, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.
2. CREDIT RATINGS AND MOODY’S MATERIALS FOUND ON WWW.MOODYS.COM OR SITES OTHER THAN RATINGS.MOODYS.COM MAY NOT BE DISPLAYED IN REAL TIME. FOR REAL-TIME DISPLAYS OF CREDIT RATINGS AND OTHER INFORMATION REQUIRED TO BE DISCLOSED BY MIS PURSUANT TO APPLICABLE LAW OR REGULATION, PLEASE USE RATINGS.MOODYS.COM.
3. You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities. Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision. No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.
4. To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.
5. You agree to read and be bound by the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.
6. You agree that any disputes relating to this agreement or your use of the Information, whether in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.
Madrid, March 29, 2023 — Moody’s Investors Service (“Moody’s”) has today upgraded the ratings of four Notes in Prodigy Finance CM2021-1 Designated Activity Company. The rating action reflects better than expected collateral performance and the increased levels of credit enhancement for the affected Notes.
….US$227.6M Class A Notes, Upgraded to Aa2 (sf); previously on Jul 14, 2021 Definitive Rating Assigned Aa3 (sf)
….US$22.8M Class B Notes, Upgraded to Aa3 (sf); previously on Jul 14, 2021 Definitive Rating Assigned A1 (sf)
….US$19.7M Class C Notes, Upgraded to A1 (sf); previously on Jul 14, 2021 Definitive Rating Assigned A2 (sf)
….US$18.2M Class D Notes, Upgraded to Baa1 (sf); previously on Jul 14, 2021 Definitive Rating Assigned Ba1 (sf)
RATINGS RATIONALE
The rating action is prompted by decreased key collateral assumptions, namely the portfolio default probability assumption due to better than expected collateral performance and an increase in credit enhancement for the affected tranches.
Prodigy Finance CM2021-1 Designated Activity Company is a static cash securitisation of unsecured student loan receivables extended by Prodigy Finance Limited (“Prodigy”, NR) to international students attending post graduate programs in different countries across the globe. The portfolio consists of approximately USD 173 million of loans as of 7 February 2023.
Revision of Key Collateral Assumptions
The transaction has one and a half years of performance history. Although total delinquencies have increased in the past year they started from very low levels, with 90 days plus arrears currently standing at 2% of current pool balance. Cumulative defaults currently stand at 2.1% of original pool balance with a pool factor of 55%.
As part of the rating action, Moody’s reassessed its default probability and recovery rate assumptions for the portfolio reflecting the collateral performance to date. Moody’s has reduced the default probability to 5.96% of the original portfolio balance, 7% of current portfolio balance, from previous 7% of the original portfolio balance. The assumption for the fixed recovery rate remained unchanged at 25%. Moody’s also maintained the portfolio credit enhancement assumption at 30%.
Increase in Available Credit Enhancement
There is a non-amortising reserve account sized at 1.2% of the total pool balance and a non-amortising capitalized interest account sized at 0.5% of the initial pool balance which will be available until the second anniversary since closing. Non-amortizing reserve fund and trapping of excess spread led to the increase in the credit enhancement available in this transaction. In addition, Class B Notes started amortising in January 2023, until then the Notes had been amortising sequentially.
For instance, the credit enhancement for the most senior tranche affected by today’s rating action increased to 49.3% from 26.2% since closing.
Counterparty Exposure
Today’s rating action took into consideration the Notes’ exposure to relevant counterparties, such as the servicer.
Moody’s notes that the transaction features some credit weaknesses such as an unrated servicer and the servicing complexity related to international borrowers. Various mitigants have been included in the transaction structure such as a back-up servicer and a US back-up servicer which will step in upon Prodigy’s insolvency or other servicer termination events. The rating of the Class A Notes is constrained by operational risk. Moody’s considers that the available liquidity and the structural features introduced to protect the transaction from servicing disruption do not fully mitigate the risks outlined above.
The ratings also consider social risk attributable to the debt burden of student loans and the affordability of education in the US. Potential regulatory or legislative changes could impact funds available to the trust.
The principal methodology used in these ratings was "Moody’s Approach to Rating Consumer Loan-Backed ABS" published in December 2022 and available at https://ratings.moodys.com/api/rmc-documents/396935. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the ratings include: (1) performance of the underlying collateral that is better than Moody’s expected, (2) an increase in available credit enhancement, and (3) improvements in the credit quality of the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the ratings include: (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody’s expected, (3) deterioration in the Notes’ available credit enhancement, and (4) deterioration in the credit quality of the transaction counterparties.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody’s evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.
Moody’s quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 issuer/deal page for the respective issuer on https://ratings.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.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.
Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Maria Turbica Manrique
VP – Senior Credit Officer
Structured Finance Group
Moody’s Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid, 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Olga Gekht
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody’s Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid, 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
https://Moodys.ethicspoint.com
Dial 1-866-330-MDYS (1-866-330-6397)
Dial the AT&T Direct Dial Access® code for
your location.
Then, at the prompt, dial 866-330-MDYS
(866-330-6397).
