KBRA Assigns Preliminary Ratings to Upstart Securitization Trust 2026-1
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Key Terms
absfinancial
Asset-backed securities (ABS) are financial instruments that bundle many individual loans or receivables—such as car loans, credit-card balances or equipment leases—and sell slices of the bundle to investors. Like slicing a loaf of bread into pieces to share, ABS let investors buy a portion of the cash flows from many borrowers, so their credit quality, payment speed and default rates directly affect the income, risk and liquidity investors receive.
securitizationfinancial
Securitization is when a bank or company takes a bunch of loans or assets, like mortgages or car loans, and bundles them together into a single package. They then sell pieces of this package to investors, who receive regular payments from the borrowers. This process helps the original lender get money quickly and spreads the risk among many investors.
overcollateralizationfinancial
Overcollateralization is the practice of pledging assets worth more than the amount of debt they secure, creating a built-in safety cushion for lenders or bond investors if the underlying assets lose value. Think of it like leaving a larger-than-required security deposit: it lowers the chance investors suffer losses, can improve credit ratings, and usually means lower yields or stricter terms for borrowers because the investment is safer.
excess spreadfinancial
Excess spread is the extra interest income left over after a pool of loans or receivables pays the interest owed to bondholders, servicing fees and expected losses. Think of it as the monthly margin a business keeps after paying suppliers and operating costs — it acts as the first cushion that absorbs losses and supports payments to investors, so larger excess spread reduces investor risk and can boost the safety or return of a securitized deal.
cash reserve accountfinancial
A cash reserve account is a dedicated holding for readily available money that a company or investor keeps to cover unexpected costs, short-term bills, or quick opportunities. Think of it as a rainy‑day fund or a checking account for emergencies: it matters to investors because the size and accessibility of these reserves indicate how well an entity can survive downturns, meet obligations, maintain operations, or act quickly without selling long‑term assets.
collateral poolfinancial
A collateral pool is a group or “basket” of assets—such as loans, mortgages, equipment, or securities—that a borrower pledges to back a loan or a bond. For investors, it matters because the pool is the source of repayment if the borrower can’t pay: a larger, higher-quality pool lowers risk and can improve credit ratings, while a weak or concentrated pool increases the chance of losses, similar to having multiple guarantees rather than relying on a single promise.
capital structurefinancial
Capital structure is the way a company finances its operations and growth by using different sources of money, such as borrowed funds (loans or bonds) and owner’s equity (investments from owners or shareholders). It’s like a recipe for baking a cake, where the balance of ingredients affects the final product's strength and taste; similarly, the mix of debt and equity influences a company's stability and risk. For investors, understanding a company's capital structure helps gauge how risky it might be to invest or lend money.
esgfinancial
ESG stands for Environmental, Social, and Governance, which are key factors investors consider when evaluating how sustainable and responsible a company is. It involves assessing how a company manages its impact on the environment, treats its employees and communities, and operates transparently and ethically. Investors use ESG criteria to identify businesses that align with their values and have the potential for long-term success.
NEW YORK--(BUSINESS WIRE)--
KBRA assigns preliminary ratings to four classes of notes issued by Upstart Securitization Trust 2026-1 (“UPST 2026-1”), a $292.21 million consumer loan ABS securitization collateralized by unsecured consumer loans and auto secured personal loans. UPST 2026-1 represents the 49th ABS securitization collateralized by loans originated through the online platform operated by Upstart Network, Inc. (“Upstart” or the “Company”), a 100% owned subsidiary of the publicly traded entity Upstart Holdings, Inc. (NASDAQ: UPST).
The preliminary ratings reflect initial credit enhancement levels of 60.65% for the Class A-1 and Class A-2 notes, 46.85% for the Class B notes, 35.90% for the Class C notes and 20.50% for the Class D notes. Credit enhancement consists of overcollateralization, excess spread, a non-declining cash reserve account and subordination (except for the Class D notes). As of the Feburary 3, 2026 statistical cutoff date, the collateral pool of UPST 2026-1 will include approximately $365.3 million of loans where auto secured personal loans comprise approximately 2.5% of the pool.
KBRA applied its Consumer Loan ABS Global Rating Methodology, as well as its Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology as part of its analysis of the portfolio pool data, underlying collateral pool and capital structure. KBRA considered its operational reviews of Upstart, as well as periodic update calls with the Company. Operative agreements and legal opinions will be reviewed prior to closing.
To access ratings and relevant documents, click here.
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), one of the major credit rating agencies (CRA), is a full-service CRA 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. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
