Mulligan Funding, a lender that provides financing to medium- and small businesses, will raise $100 million in asset-backed securities secured by a revolving portfolio of fixed-term receivables, in a deal where the trust could issue additional notes during a three-year revolving period.
Mulligan Asset Securitization, 2023-1, is a first time ABS issuer, according to Kroll Bond Rating Agency. Owned primarily by Ptolemy Capital, the San Diego, Calif.-based company currently funds its debt through a warehouse facility from DZ Bank and Canadian Imperial Bank of Commerce, or CIBC.
Guggenheim Securities is the initial note purchaser, while U.S. Bank Trust Company is the indenture trustee, KBRA said. Mulligan's revolving period ends on either January 31, 2026, about three years after the deal closes, or after a Rapid Amortization Event. During this time, the trust could issue additional notes, up to $500 million, if it meets certain conditions.
The company uses a proprietary risk-scoring model to screen potential borrowers for qualification, loan sizing and risk-adjusted pricing. It finds clients through three main channels: its direct sales team, independent sales organizations and existing customer renewals, KBRA said.
Although Mulligan lends to both small and medium-sized companies, its core market consists of established companies that generating at least $95,000 in annualized revenue. Its core market typically generates annualized revenue of $150,000 to $30 million, with an average of $4 million.
Far from getting startups off the ground, Mulligan's merchant clients have been in business more than 11 years, and the primary business owner has a credit score of 716. For its part, Mulligan has maintained relationships with lending partners for more than 14 years. It is also considered a leading financier in its segment, having provided access to more than $1 billion in financing, according to KBRA.
For its first sponsored ABS issuance, Mulligan has layered on several forms of credit enhancement. Excess spread is at least 4.00%; the transaction also has a reserve account funded in an amount equal to 0.50% of the aggregate collateral pool balance, building to a target of 0.75%.
The deal will repay notes sequentially, and subordination provides further credit enhancement.
KBRA expects to assign ratings ranging from 'A' on the $76.6 million, class A notes to 'BB-' on the $4.9 million, class D notes. All of the notes have a legal final maturity date of Feb. 15, 2030.
