A mixed pool of loans on home improvement installments and marine or recreational vehicles will secure $404.1 million in asset-backed securities (ABS) from the Aqua Finance Issuer Trust, 2025-B.
AQFIT 2025-B is the seventh securitization deal from sponsor Aqua Finance Issuer, and marine vehicles and RV loans compose half the collateral pool, 50.8%, according to analysts at Moody's Ratings. Previous transactions, particularly before the AQFIT series 2025-A and 2024-A, contained no more than 20% of those types of loans.
The pool contains 21,750 loans, which have an average remaining loan size of $18,583, and they have a weighted average (WA) FICO score of 733.
Four A, B, C and D tranches, which all have a legal final maturity date of May 17, 2051, will issue the notes to investors. Also, the notes benefit from initial hard credit enhancement levels of 44.10%, 29.30%, 19.5% and 9.30%, respectively, Moody's said. The deal will repay investors sequentially.
The notes classes' credit enhancement levels present one of the deal's credit challenges, the rating agency said. Should the class A notes reach 40.0% of the current balance, the transaction will switch to a pro rata payment structure, and that would increase the average life of the senior notes and expose the notes to additional credit risk.
That condition is only temporary, because a cumulative net loss trigger mitigates the risk, which switches the deal's payment structure back to sequential pay.
On a WA basis, the collateral pool has an original term of about 171 months, or 14.3 years. Longer terms expose pools the additional risk, by extending the length of time that the loan is exposed to credit risk, Moody's said.
In another potential credit drawback, Moody's considers AFI to be a weaker sponsor, because it has limited managed assets relative to other ABS sponsors, Moody's said.
"A transaction in which the sponsor and servicer has low durability can lead to additional variability to the expected base case loss scenario, because their default probability is uncertain," the rating agency said.
Moody's assigned ratings to just one class of notes, Aaa to the class A.
