KBRA Takes Rating Actions on Pagaya AI Debt Selection Trust and Pagaya AI Debt Trust

KBRA affirms its ratings on four classes of notes and upgrades the ratings on five classes of notes from three Pagaya AI Debt Selection Trust and Pagaya AI Debt Trust (“PAID”) transactions. Concurrently, KBRA removes the PAID 2021-3 Class C notes rating from Watch Downgrade, where they were placed on March 5, 2024, due to deteriorating credit performance and declining overcollateralization. Since the initial Watch Placement, while PAID 2021-3 continues to see credit deterioration, Pagaya has supported the transaction by utilizing the optional repurchase mechanism, which increased O/C by 4.96% percentage points. KBRA’s analysis indicated that existing credit enhancement for the notes is sufficient to support the revised and affirmed ratings. The data used for this review is as of the August 2024 distribution date (July 2024 collection period). To date, the securities have received timely interest payments.

KBRA recently performed surveillance on 10 PAID transactions that had at least six months of seasoning. The most recent surveillance report can be found here. Concurrently, KBRA placed its ratings on one class of notes issued from PAID 2021-1 on Watch Downgrade due to deteriorating credit performance. The link to the press release can be found here.

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Methodologies