Aqua Finance is returning to the securitization market to raise $381.3 million in bonds secured by contracts financing water treatment equipment, home improvement products, marine craft and recreational vehicles. The current pool of borrowers includes more loans extended to higher-quality borrowers.
Through Q4 2025, originations were up 30.6% year-over-year, as new partnerships with equipment manufacturers, primarily marine craft and RVs, contributed higher-quality borrowers to the pool, say analysts at Kroll Bond Rating Agency.
On average, loan balances were $18,723 to borrowers with a FICO score of 742 on a weighted average (WA) basis, the highest in several issuance cycles. Underlying borrowers with a FICO score of 700-plus have accounted for a majority of the pool going back several deals, KBRA said, but this time that percentage reached 73.46%.
KBRA assigns AAA, AA-, A- and BBB- to classes A, B, C and D, Aqua 2026-A's notes. Asset Securitization Report's deal database says Moody's Ratings assigns Aaa and A3 to classes A and B, respectively.
The transaction, Aqua Finance Issuer Trust 2026-A, will issue four tranches of notes, classes A, B, C and D that all have a legal final maturity date of April 17, 2051. Initial credit enhancement on the notes include 51.4%, 35.08%, 25.82% and 10.98%, respectively, KBRA said.
Overcollateralization, subordination to the classes A through C, a cash reserve account provide the credit enhancement to the outstanding notes, the rating agency said. Initial and target overcollateralization will be 10.5% of the initial pool balance, the rating agency said. If a cumulative net loss failure occurs, the overcollateralization will build to 100%, KBRA said.
In addition to subordination, the interest on the subordinated classes of notes may be deferred on the portion of their principal balance if the deal is experiencing a cumulative net loss. Those amounts of deferred interest will be paid to the more senior classes until they are repaid or until Aqua 2026-A resolves the cumulative net loss event.
At closing, Aqua 2026-A will have a cash reserve account that will equal about 0.50% of the initial pool balance, to be replenished by excess cash if shortfalls occur, the rating agency said.
Marine and recreational vehicles and home improvement projects account for 54.0% and 46.0% of the collateral pool, respectively, as of the Feb. 3, 2026 cutoff date, KBRA said.
