KBRA upgrades and affirms ratings on Pagaya motor ABS notes

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KBRA upgrades Pagaya ABS ratings

Highlights

KBRA upgrades and affirms ratings on seven Pagaya auto ABS transactions, citing increased credit enhancement and consistent timely interest payments to investors.
Pagaya Technologies reports Q4 2025 revenue and other income of $335 million, up from $279 million, and net income of $34 million versus a prior net loss of $238 million.
Pagaya's unrestricted cash rises to $235 million and total shareholders' equity to $555 million as of December 31, 2025, reflecting robust capital position and active institutional partnerships.

Rating review covers seven Pagaya transactions

As reported by KBRA, the rating agency says the upgraded securities all show increased credit enhancement, while all notes reviewed have received timely interest payments to date. KBRA says RPM 2025-5, RPM 2025-6, RPM 2026-1, and RPM 2026-2 are excluded from this review because those transactions closed recently.

In its review, KBRA says it applies its Auto Loan ABS Global Rating Methodology together with its Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology. The agency reviews collateral performance to date and projects remaining transaction losses based on current assumptions, with related deal and tranche data available through its surveillance dashboard.

Pagaya platform performance and financing context

Pagaya Technologies Ltd., the parent of the sponsor, says in its unaudited financial statements for the fourth quarter ended December 31, 2025 that total revenue and other income rise to $335 million from $279 million a year earlier. The company also reports net income attributable to shareholders of $34 million, compared with a net loss of $238 million in the fourth quarter of 2024.

As of December 31, 2025, Pagaya holds $235 million in unrestricted cash and cash equivalents and $555 million in total shareholders' equity, up from $188 million and $442 million, respectively, a year earlier. The company continues to maintain forward flow partnerships and warehouse facilities with institutional partners.

Pagaya originates loans using its machine learning-based Pagaya Risk Tier Score methodology, implemented in 2024, which ranks loans from 1 to 7 by risk level and guides loan purchases across multiple platforms. Its financing vehicles acquire loans from originators including Ally Bank, Consumer Portfolio Services, Stellantis Financial Services and Westlake Financial, while backup servicing arrangements with Vervent Inc. and Systems & Services Technologies Inc. are in place to reduce servicing disruption risk.

In our earlier coverage of KBRA’s preliminary ratings on Mission Lane Credit Card Master Trust, Series 2026-A, we outlined the structure of the planned credit card ABS deal backed by receivables from TAB Bank and WebBank accounts. We noted the six note classes, the initial credit enhancement stack (including excess spread, overcollateralization, subordination and a potential reserve), and the roughly three-year revolving period, along with KBRA’s use of its credit card ABS, counterparty and ESG methodologies.

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