KBRA Affirms and Upgrades Ratings from Theorem Funding Trusts

KBRA affirms its ratings on three classes of notes and upgrades its ratings on five classes of notes issued from five Theorem Funding Trust (“THRM”) transactions. KBRA’s analysis indicated that existing credit enhancement for the notes is sufficient to support the revised and affirmed ratings. All of the securities with upgraded ratings experienced increased credit enhancement, and, in the case of the ratings associated with THRM 2021-1, a decrease in expected lifetime CNL relative to expectations at issuance. The data used for this review is as of the March 2025 distribution date (February 2025 collection period). To date, the securities have received timely interest payments.

In performing its rating review, KBRA utilized its Consumer Loan ABS Global Rating Methodology, as well as its Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology. In determining these rating actions, KBRA reviewed the collateral performance to date and projected the remaining loss for the transactions based on current assumptions. The rating actions, along with related deal and tranche performance information, are available in spreadsheet form in the accompanying Theorem Funding Trust Comprehensive Surveillance Dashboard.

In October 2024, Pagaya Technologies Ltd. (“Pagaya Technologies”), an Israeli corporation listed on the NASDAQ (PGY), completed a 100% acquisition of Theorem Partners LLC (“Theorem”). Following the acquisition, Theorem now operates under the Pagaya Technologies platform. Pagaya Technologies is a financial company in the lending marketplace that uses machine learning, data analytics, and AI-driven credit and analysis technology. The combined platform following the acquisition now exceeds $3 billion in assets under management. As of March 2025, KBRA has ratings on 30 outstanding transactions under its Pagaya AI Debt Grantor Trust shelf as well as six transactions under its Research-Driven Pagaya Motor Asset Trust shelf.

Theorem Partners LLC was founded in 2014 and had purchased loans originated under the Prosper Platform, LendingClub Platform, Upstart Platform, Marlette Platform, and Upgrade Platform. The company was a research-driven investment manager that used data science and machine learning to purchase mainly unsecured personal loans from various marketplace lending (“MPL”) platforms. Below summarizes each Theorem transaction’s respective MPL origination platform and respective servicer of the collateral supporting the transaction.

According to Pagaya Technologies’ 10k report for the FY 2024, compared with FY 2023, total revenue and other income increased to $1 billion from $773 million, and net losses increased to $401 million from $128 million. Additionally, it had $188 million in cash and cash equivalents, and $442 million in total shareholders’ equity, compared with $186 million and $666 million, respectively, as of December 31, 2023. As of December 31, 2024, Pagaya Technologies had $176 million of secured borrowings, $321 million of long-term debt.

The related transactions are listed further below with links to the appropriate page on kbra.com which show the applicable resulting ratings.

Click here to view the report.

For additional information regarding a specific transaction, see the list below to access ratings, reports, and disclosures:

Methodologies