NEW YORK–(BUSINESS WIRE)–KBRA assigns preliminary ratings to three classes of notes issued by CP EF Asset Securitization I, LLC, Series 2022-1 (“CPEF 2022-1”), an equipment ABS transaction.
CPEF 2022-1 represents Channel Partners Capital, LLC’s (“CPC” or the “Company”) first equipment ABS following the Company’s inaugural ABS transaction, CPC Asset Securitization I Series 2021-1 (“CPC 2021-1”) in December 2021. CPC 2021-1 was collateralized by small business loans and business cash advances. The Company, which was founded in 2009, focused on providing point of sale working capital finance to small businesses during the first ten years of its history. This strategy resulted in CPC working with and developing relationships with equipment finance partners.
Beginning in 2020, CPC launched its own equipment finance offering. Originations are sourced through CPC’s network of equipment finance company partners, which refer business to CPC for both working capital finance as well as for equipment finance. CPC generally funds originations that its partners are unable to finance, and the current portfolio consists mostly of the following: 1) originations in excess of risk-based portfolio concentration limits for a partner (for example obligor or industry limits) 2) originations that don ‘t fit a partner’s credit strategy and 3) originations from brokers.
The discounted pool balance represents the discounted value of the projected cash flows of the contracts included in the collateral pool using a discount rate based on the interest rate on the notes plus fees and other amounts. As of May 31, 2022, based on a discount rate of 9.13%, the discounted pool balance is $147.6 million (“Statistical Pool”). The transaction also features a prefunding account of approximately $33.2 million that may be used to purchase additional contracts during the three month period following the closing date.
CPEF 2022-1 will issue three classes of notes. Credit enhancement includes excess spread, a reserve account, overcollateralization and subordination for senior classes. The overcollateralization is subject to a target equal to 22.75% of the current pool balance and a floor equal to 0.50% of the initial pool balance. The reserve account is funded at 1.00% of the initial pool balance and is non-amortizing.
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