FortiFi Financial is preparing to sell $118.9 million of asset-backed securities from a portfolio of property assessed clean energy (PACE) bonds that are financing more properties in Florida and a higher weighted average coupon than the program's previous transaction.
ING Financial Markets and Barclays Capital are managers on the deal, while Barclays is the sole structuring agent, according to Asset Securitization Report's deal database. The database also noted an expected spread of 305 basis points over the Interpolated yield curve on notes that Kroll Bond Rating Agency expects to rate 'AAA'.
Among key changes to this deal, Florida contributes a higher percentage of PACE assessments, at 79.1%, compared with 32.7% in the FortiFi 2021-1 deal, according to a pre-sale report from Kroll Bond Rating Agency. On a weighted average (WA) basis the loans have an average coupon of 7.20%, higher than 6.22% in FortiFi 2021-1.
FortiFi 2023-1 consists of 4,028 PACE assessments levied on 4,010 residential properties and 18 commercial properties. The share of commercial properties is also lower, at 1.12%, compared with 1.66%, KBRA said.
Local governments create the collateral for PACE loans when they levy annual or semiannual property tax assessments as guarantees on the buildings being improved. Through the tax assessment the loans remain associated with the property, not the landlord borrower, so in the event of a sale the obligations pass to the new owner.
FortiFi benefits from credit enhancement in the form of excess spread at 1.16% to begin with. As for subordination, the class A notes benefit from subordination from the class B notes, in an amount equal to 3.00% of the aggregate principal balance of the PACE bond portfolio.
Liquidity reserves also provide credit enhancement to the notes, according to the rating agency. Initially, a reserve amount will be funded at 0.84% of the closing PACE bond portfolio balance, or $1 million, the rating agency said.
