Affirm is preparing to issue $500 million in asset-backed securities (ABS) to noteholders through the Affirm Asset Securitization, series 2024-B, which will be repaid from a pool of point-of-sale unsecured consumer loans.
The transaction will issue the notes through five tranches of A through E notes, according to a pre-sale report from Morningstar DBRS. The notes have a legal final maturity date of Sept. 17, 2029, according to DBRS. Slated to close on September 17, the deal has Barclays on as manager.
In addition to sponsoring the deal, Affirm acts as seller, servicer, custodian and administrator, the rating agency said. The deal will have a 24-month revolving period, where eligible receivables will be sold into the trust, as long as certain concentration limits are met.
All of Affirm's loans, which are non-revolving, unsecured, fully amortizing and fixed-rate, DBRS said, and only loans with original terms of 24 months or more will be included in the transaction. Cross River Bank, Celtic Bank, Affirm Loan Services and Lead Bank originated the loans in the pool, DBRS said.
During its paydown period, the deal will have a sequential-pay structure. No principal will be paid to class B noteholders until the A tranche has been paid in full, and the transaction will follow the same sequential repayment order until all notes are repaid in full.
Affirm Asset Securitization benefits from overcollateralization in several forms. Target overcollateralization during the revolving period will equal 2.65% of the initial adjusted pool balance. During the amortization period target overcollateralization will equal 5.15% of the initial adjusted pool balance. The yield supplement overcollateralization amount will equal $6.2 million at closing, and is designed to ensure that Affirm loans with a contract rate below 18% meet a minimum yield requirement, DBRS said.
Fitch Ratings notes that credit enhancement on the notes ranges from 26.99% on the class A tranche to 2.89% on the class E tranche.
Fitch also notes that Affirm partners with a large and diverse merchant mix, mitigating any risks from exposure to any individual merchant relationship, Fitch said.
DBRS assigns AAA to the class A notes; AA to the class B; A to class C; BBB to the D tranche and BB to tranche E.
Fitch, meanwhile, assigns AAA to the class A notes; AA to class B; A to class C and BBB to class D.
