A pool of unsecured consumer loans that finance dental, dermatology, optometry and other elective services will secure $250 million in asset-backed securities (ABS) from the Cherry Securitization Trust.
This is Cherry Technology's inaugural 144A securitization, according to Kroll Bond Rating Agency. Founded in 2019, the company provides point-of-sale unsecured consumer loans and retail installment contracts to prime borrowers, primarily, seeking elective medical services.
The transaction will issue notes through four tranches of class A, B, C and D notes and they all have an April 15, 2032 legal final maturity date, KBRA said.
Barclays is the manager on the deal, according to Asset Securitization Report's deal database. The notes are expected to yield 5.78% on the class A notes, then 6.08%, 9.49% and 12.59% on classes B, C and D notes, respectively. All the notes are benchmarked to the three-month interpolated yield curve, according to the database.
KBRA will repay principal to noteholders sequentially, starting with class A, KBRA said, while receiving principal payments after interest on all outstanding notes.
Credit enhancement includes initial overcollateralization representing 4.25% of the original pool balance, a non-declining reserve fund representing 1.00% of the pool balance at closing, and 11.2% in excess spread.
The capital structure also has a 24-month revolving period, which could end if any one of eight amortization triggers occur in the deal.
Cherry Technologies started as Mason Finance and offers the loans on fixed-rate amortizing terms according to KBRA. Original loan terms can range from three to 60 months, and borrowers can finance between $200 to $35,000, the rating agency said. On average, receivables are originally $2,000 and on a weighted average (WA) basis the interest rate is about 14.34%.
Cross River Bank, Lead Bank, Cherry Technologies and Cherry Retail Installment originated the 169,371 loans in the pool, according to KBRA. The loans in the securitized pool have an average current loan balance of $1,603. The assets have a weighted average (WA) coupon of 14.34%, a WA Vantage Score of 715, and a WA remaining term of 21 months.
As of the July 31 cutoff date, the dental and medical spa industries composed 41.9% and 41.0% of the pool balance, respectively.
KBRA assigns ratings of A, BBB, BB and B to the classes A, B, C and D, respectively.
