Capital Street Master Trust is preparing to issue $475 million in structured credit notes, collateralized by a revolving portfolio of loans to alternative investment funds, assets that are often called subscription lines, or capital call facilities.
The notes, issued through series 2025-1, will be issued through a structure with an 18-month reinvestment period, during which the transaction can add new assets until the existing receivables are repaid, according to Morningstar | DBRS, which rated the deal. DBRS also noted that most new capital call receivables that the trust adds to the Capital Street Trust need rating agency confirmation before they can be added to the trust, potentially mitigating risks associated with adding assets during the revolving period.
The master trust deal will issue two tranches of class A and B notes, DBRS said.
Capital call assets are short term, with no more than 50% of the receivables in the deal having a maturity of more than 1.1 years, with a maximum of 1.5 years, DBRS said. None of the individual capital call loans can account for more than 7.5% of the portfolio, under certain circumstances. S&P Global Ratings also assessed the transaction, noting that it has a legal final maturity of Aug. 16, 2029. When the deal closes, which is expected on July 25, the collateral pool is expected to have 36 subscription lines from 28 different general partners, S&P said.
The underlying assets have advance rates ranging from 40% to 85%, with a weighted average (WA) advance rate of 64.4%, often aligning with the credit of limited partners attached to the assets, S&P said.
The notes get credit enhancement from subordination, according to DBRS. Credit enhancement on the class A notes, rated AAA, represents 10% of the pool balance, while credit enhancement on the class B notes, rated AA, amounts to 5% of the pool balance. Capital Street's notes benefit from overcollateralization, excess spread, and a so-called remaining maturity test that requires the notes' early amortization.
S&P assigned ratings to just the class A notes, giving them AAA.
