Cherry Technologies, which provides unsecured consumer loans and retail installment contracts to finance elective medical services, is returning to the securitization market to raise $350 million through the Cherry Securitization Trust, series 2026-1.
Cherry's third overall 144A asset-backed securities (ABS) deal, will sell the notes through four classes of A, B, C and D notes, with class A issuing the bulk, $262 million, according to analysts at Kroll Bond Rating Agency.
The transaction will repay noteholders sequentially, KBRA said, lending itself to subordination. Class A notes will receive principal payments after interest payments on all outstanding notes is complete. After that, the subordinate notes will receive principal payments, KBRA said.
All the issued notes will have a legal final maturity date of Jan. 17, 2034, KBRA said. Initial credit enhancement levels are 26.25%, 15.82%, 8.42% and 1.38% for classes A, B, C and D, respectively.
The pool has a 24-month revolving period, which will end on June 30, 2028 or the date when an amortization event has occurred, whichever is earlier, according to the rating agency. During this period Cherry Technologies can transfer additional receivables to the issuer, if the loans are suitable and an amortization event has not occurred, KBRA said.
Analysts also find that there is an optional redemption feature, which allows certificate holders to redeem the notes on any day on or after the fifth business day before the monthly payment date in July 2028.
The deal structure also includes overcollateralization, initially 0.88% based on an adjusted pool balance, KBRA said. The ratio will eventually increase to 2.88% of the initial adjusted pool balance during the amortization period, the rating agency said.
There is also yield supplement overcollateralization, and a non-declining reserve account representing 0.50% of the note balance, meant to benefit the most senior outstanding note class. The most subordinated class, however, will not benefit from the reserve account.
Cherry Securitization also benefits from excess spread of about 10.33%, KBRA said.
KBRA assigns AA, A, BBB and BB to the class A, B, C and D notes.
