PowerPay, a Wayne, Penn.-based company that provides home improvement and elective medical financing solutions is preparing to raise $556 million from the asset-backed securities (ABS) market.
Through the PowerPay Issuance Trust, series 2025-1, the sponsor will sell notes through four tranches of class A, B, C and D, all of which have a legal final maturity of Nov. 18, 2041, according to ratings analysts at Kroll Bond Rating Agency.
The class A tranche will issue to the bulk of the notes, $474.2 million, KBRA said. Class A notes, rated AA-, benefit from 16.50% in initial credit enhancement. This is the second 144a securitization deal for PowerPay, which lends to prime quality borrowers, the rating agency said.
The transaction has a 90-day prefunded period, initially funded with $132.9 million in deposits. PowerPay Issuance 2025-1 also benefits from layers of credit enhancement that include overcollateralization, subordination, a non-declining reserve fund that will be funded at closing and excess spread.
Overcollateralization amounts to 1.50% initially, with the target being either 1.50% of the outstanding pool balance or 0.30% of the initial pool balance, whichever is greater. The reserve account will equal 0.50% of the initial pool balance, KBRA said.
The trust can also defer interest payments to the subordinated classes, under certain circumstances. Specifically, if a cumulative net loss ratio trigger event occurs, then outstanding interest to all classes of notes may can be put off until the interest and principal on the most senior class is paid in full. Repayment could also resume if the event that triggered the delay is resolved, KBRA said.
The rating agency describes a strong underwriting process for PowerPay, first saying they typically have prime FICO scores. In fact, applicants with credit scores of less than 600 are automatically declined. Also, for non-refinance loans, approved borrowers must have a payment-to-income ratio of less than 18% and a debt-to-income ratio of less than 75%.
All servicing and collection activities for the loans will be handled by PowerPay, with Wilmington Trust on the deal as the back-up servicer, the rating agency said.
Investors will be repaid sequentially, with the class A notes receiving interest, then principal payments on all outstanding notes, then principal payments to all subordinate notes, the rating agency said.
