Consumer installment contracts on marine/RV vehicles, plus water treatment equipment and home improvements will collateralize $328.9 million in asset-backed securities (ABS) that Aqua Finance is bringing to market through the Aqua Finance Issuer Trust, series 2026-B.
The deal will sell notes through four tranches of classes A, B, C and D, which all have a legal final maturity date of Sept. 18, 2051, according to Kroll Bond Rating Agency. The four tranches of class A, B, C and D notes benefit from initial credit enhancement levels of 40.25%, 28.00%, 20.80% and 8.75%, respectively.
Aqua Finance's credit enhancements include a sequential pay structure until the class A credit enhancement period is over. After that, the principal allocation will become pro rata for all the notes, KBRA said.
Classes A, B, C and D are expected to receive ratings of AAA, AA-, A- and BBB-, respectively.
Notes will also benefit from subordination, and interest on the subordinated notes might be deferred on the portion of the principal balance of such classes, which are underutilized if a cumulative net loss is happening, KBRA said.
Credit enhancement features include initial overcollateralization (O/C) is expected to be 8.25% of the initial pool balance, with a floor of 1.00% of the initial pool balance. If excess amounts are drawn down to cover cash shortfalls, then future excess amounts will be deposited in the reserve fund to bring the amount back to the reserve account level of 0.50% of the initial pool balance.
When the deal closes, a cash reserve account will be in place equal to about 50% of the initial pool balance, the rating agency said. The notes also benefit from excess spread is about 4.16%, according to the rating agency.
Marine and RV loans account for the large majority of the pool, 71.2%, leaving home improvement loans to account for the other 28.8%, by the July 21, 2026 cutoff date, the rating agency said.
The deal benefits from a significant origination boost, 29.5%, for the year ended 2025, KBRA said, thanks to new original partnerships with original equipment manufacturers (OEM).
Aqua Finance's underlying loans have an average current balance of $25,722. On a weighted average basis, the loans have a weighted average (WA) interest rate of 11.13%, a FICO score of 759, and a WA original term of 179 months, the rating agency said.
The pool diversification, at least geographically, is moderate Pennsylvania, Texas and California, with 10.96%, 9.78% and 8.15%, respectively.
