Small business loans and unsecured consumer loans extended to prime, high-income professionals will secure BHG 2022-B’s planned $300 million asset-backed securitization (ABS).
The pending transaction is the fifth term securitization from BHG 2022-B, sponsored by Bankers Healthcare Group, according to Kroll Bond Rating Agency. As of April 30, the collateral pool’s statistical cutoff date, commercial loans and consumer loans accounted for 74.2% and 25.8% of the deal’s underlying assets, respectively.
Some 2,785 loans comprise the deal’s underlying assets.
Credit Suisse Securities is the initial note purchaser on the deal, which has a structure that will repay investors sequentially, KBRA said. The $113 million class A notes, which are slated to be rated ‘AAA’, will receive principal payments in full before payments to the $77.4 million class B notes begins. The deal will follow that payment structure until principal amounts are repaid in full.
BHG 2002-B’s notes benefit from initial overcollateralization of 5.4% of the initial pool balance, plus the pre-funding account amount. This amount will increase to a target of 10.4% of the current pool balance. KBRA further explains that the amount is subject to a floor of 1.0% of the initial pool balance, plus the prefunding account amount.
The deal also includes a cumulative net default trigger. If breached, the transaction will enter a full turbo amortization as long as the trigger is in breach. Other forms of credit enhancement include a cash reserve account equal to about 0.5% of the initial pool balance, as well as excess spread amounting to about 8.0%.
While BHG 2022 several layers of credit benefits to the notes, KBRA pointed to some borrower characteristics that also boost confidence in timely repayments to bondholders. Bankers Healthcare, founded in 2001, started out by making loans to licensed medical professionals only. Then it began to offer personal consumer loans to this group, and then moved to provide financing to professionals such as attorneys, financial advisors and accountants with high incomes and credit quality.
On a weighted average (WA) basis, borrowers had a FICO score of 730, loans had original terms of 100 months, and seasoning of two months.
Ratings through the rest of the deal range from ‘AA’ on class B notes through ‘BBB-’ on the class E notes.
