Donna M. Mitchell

Zayo Issuer, series 2026-1 and 2026-2, uses a master trust structure that will initially issue five tranches of classes A, B and C notes, and can issue additional classes if they meet certain conditions.

The deal will issue floating-rate notes, through the A-1B tranche, while underlying variable-rate loans are pegged to either CME Term SOFR or the 30-day average SOFR.

The sophomore outing follows a similar structure as the Clarus 2024-1, with six tranches of class A, B, C, D and E notes. The A2 tranche will issue the bulk of notes, $165.4 million.

The underlying collateral pool is composed of 45,323 receivables, which have an average remaining loan balance of $30,210, and an average percentage rate (APR) 5.56%.

The public and large institution segment make up 89.7% of obligors, up from the 87.7% seen in DEFT 2025-2, an increase that was driven largely by an increase in the large enterprise institution segment.

The proceeds from PAID 2026-R2 will fund a purchase account, which will purchase unsecured consumer loans from PAID 2024-2 and 2024-3.

Loans with original balances higher than $100,000 accounted for 16.1% of the pool, down from 20.3% in the 2025-2 pool of the Hilton Grand Vacations Trust.

All 244 underlying loans initially had a period of fixed rates between 60 and 120 months at origination and are currently ARMs, although none are interest-only.

The deal increased its initial credit enhancement levels across the board, with the A-, BBB and BB- notes benefiting from levels of 21.89%, 1.89% and 5.74%, respectively.

Loans originated under Sallie Mae's Smart Option loan program, which have demonstrated significantly lower default rates compared with those from the Signature program, make up the entire collateral pool.

Full documentation was completed on just 17.9% of the pool, Fitch said, while bank statements and debt service coverage ratio (DSCR) account for 17.6% and 28.0%, respectively.

The mortgage's proceeds, with $518 million of cash equity contributed by the sponsor, will also be used to buy Hawaii-based Alexander & Baldwin, a commercial property REIT.

The deal structure includes credit support from a full turbo structure. All excess cash flow will be used to repay note holders without the issuer receiving excess spread until the notes are fully repaid.

For the first time, the FIAOT shelf includes commercial vehicles originated through the SFS's Captive Program, extending vehicle financing to small business owners.

Full documentation was only applied to 2.6% of the underlying pool of mortgages. Debt-to-income, however, was 23.3% when it was applied.

Before the transaction has amortization event, principal payments will enter full turbo during the deal's first 12 months.

Some 90.3% of the loans have had a clean payment history over the past 12 months, with a 1.3% delinquency rate.

Classes A through SB will receive principal until the balance is reduced to its intended level, then tranches A1, A4, A5 and A-SB certificates will receive principal payments sequentially.

Most of the loans, 57.34%, are for cashout purposes and the entire loan pool are first-liens, and are of modest leverage, with an original cumulative loan-to-value (LTV) ratio of 69.74%.

The A1A and A1B tranches, rated 'AAA' from S&P and Kroll Bond Rating Agency, are expected to pay coupons of 5.31%.