KBRA Assigns Preliminary Ratings to Cartiga Asset Finance Trust 2023-1

KBRA assigns preliminary ratings to three classes of notes issued by Cartiga Asset Finance Trust 2023-1 LLC (Cartiga 2023-1), an asset-backed securitization collateralized by litigation finance receivables.

Cartiga 2023-1 represents the third ABS collateralized by litigation finance receivables to be sponsored by Cartiga Asset Management LLC (Cartiga or the Company). Cartiga, formerly known as Legal Business Services, LLC (LBS), was established in 2019 through LBS’ purchase of Westbury Management Group (WMG) which owned three existing litigation finance businesses: Cartiga Consumer Funding, LLC (f/k/a LawCash) (Cartiga Consumer), Momentum Funding, LLC (Momentum) and Ardec Capital Solutions LLC (Ardec). Cartiga Consumer, Momentum and Ardec are licensed subsidiaries of Cartiga.

Cartiga 2023-1 includes receivables originated through Cartiga Consumer and Momentum only, representing Cartiga’s consumer business line. The consumer business line provides financing to claimants for pre-settlement and post-settlement legal claim proceeds. Ardec, Cartiga’s commercial business subsidiary, provides recourse working capital finance to lawyers and law firms. Ardec receivables are not included in the pool. Cartiga, through predecessor companies, has over 20 years of operating history. This history informs Cartiga’s proprietary database of over 235,000 fundings of litigation-linked assets. The Company had $78 million of consumer originations in 2022 of which $65 million remains outstanding.

Cartiga 2023-1 will issue three classes of notes (Notes). The Notes benefit from credit enhancement in the form of overcollateralization and, for the Class A and B notes, a cash reserve account and subordination. The portfolio securing the $111.9 million in Notes has an aggregate funded amount of approximately $103.4 million and an aggregate discounted projected receivable balance (ADPB) of approximately $139.8 million, including assumed prefunding, as of January 15, 2023 (Cutoff Date) based on the illustrative discount rate of 8.51%. The ADPB is the aggregate discounted collections associated with Cartiga 2023-1’s litigation receivables (Receivables). The discount rate used to calculate the ADPB is a percentage equal to the sum of the anticipated interest rate on the Notes, the servicing fee rate of 1.25%, and an additional 0.10%. As of the Cutoff Date, Cartiga Consumer Receivables and Momentum Receivables comprise approximately 72.5% and 27.5%, respectively, of the aggregate funded amount and the average advance to expected case settlement value is 9.07%. The transaction also features a $10 million prefunding account that is funded through the note issuance and may be used to purchase additional eligible Receivables during the three months after closing.

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Related Publications

• ABS General Global Rating Methodology for Asset-backed Securities
• Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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