In its third tax lien asset-backed securitization deal, Finch Investment Group is preparing to sponsor $206.3 million in notes, issuing them through the transaction named FCI Funding 2024-1.
Slated to close at the end of September, the deal will issue notes through two tranches of classes A and B notes, according to Kroll Bond Rating Agency, which added that the notes' legal final maturity date is August 2036. Proceeds from the notes will purchase a portfolio of 50,845 property tax lien assets from municipalities in six states. The income from those lien assets will secure the notes.
Capital One Securities is the manager on the transaction, according to the Asset Securitization Report's. Should the notes price at par, yields are expected to come in at 5.5% on the class A notes and 6.5% on the class B notes, the database said. KBRA expects to assign ratings of AAA and A on classes A and B, respectively.
KBRA says the transaction has two different reinvestment accounts. The account for additional tax liens can purchase up to $23 million of qualified assets on or prior to the second anniversary of the deal's closing date. The subsequent tax lien account can be used to purchase tax liens on properties related to tax liens in the initial pool, and those bought during the reinvestment period, KBRA said.
Timely repayment of the notes is supported in part by a sequential payment priority, where interest to classes A and B will be repaid sequentially each month before principal payments, ratings analysts said.
Other forms of credit enhancement include overcollateralization representing 5.1% of the tax liens' and additional tax liens' redemptive value. The notes are also protected by a class A acceleration event. Should any payment date occur on or after August 2026, if after application of payments, the eventual outstanding principal balance of the class A notes exceeds the targeted principal balance for the payment date.
Credit enhancements also include an expense reserve account, and a working capital reserve account.
Residential properties account for most of the tax liens (69.0%), while commercial (18.0%), vacant and properties described as 'other' (3.0%) comprise the pool.
