Avant Credit Card Master Trust, Series 2021-1, is preparing to issue about $150 in asset-backed securities (ABS), from a pool of credit card receivables.
The transaction marks the first credit card deal from Avant LLC, a company that has been issuing consumer loan ABS since 2016, according to DBRS Morningstar. Similar to its consumer loan business, Avant, operates an online credit card issuance platform, extending credit through predetermined underwriting criteria. Its partner, WebBank, originates the credit card accounts.
The collateral pool will be shared with other issuances, receiving allocations according to series allocation mechanics, according to DBRS.
Avant LLC is playing several roles in bringing the rule 144A and Regulation S transaction to market, acting as sponsor, program manager, and servicer. The transaction is expected to close on September 28, according to DBRS.
Avant’s capital structure includes four classes of notes, with overcollateralization, subordination, excess spread and a reserve account amount providing credit enhancement to the notes, DBRS said.
The trust includes a 36-month revolving period that will allow the trust to purchase additional receivables as it collects principal, DBRS said.
Kroll Bond Rating Agency noted that no principal payments will be made on the notes during the three-year revolving period unless and early amortization event occurs. KBRA also noted that the trust has no concentration limits on receivables that the trust might add during the revolving period. This puts the credit quality of the trust at risk of deterioration to an extent that is more than expected over the course of that period.
Further, Avant has a limited performance history in the credit card origination and servicing business. KBRA noted that the credit card accounts had not been tested yet in a severe economic downturn, aside from the extraordinary stimulus measures that the U.S. government took to buttress consumer debt performance amid the COVID-19 pandemic induced recession.
As of July 31, 2021, Avant had more than 640,000 open credit card accounts, with an outstanding principal balance of $182.3 million.
The notes have a legal final maturity of April 15, 2027.
DBRS expects to issue ratings on the notes that range from ‘AA’ on the $111.9 million, class A certificates to ‘BB’ on the $14.5 million on the class D notes.
KBRA expects to issue ratings that range from ‘AA-‘ on the $111.9 million, class A certificates to ‘BB-’ on the class D notes.
