Foundation Finance is preparing a securitization of retail installment sale contracts, the Foundation Finance Trust 2023-1, to fund home improvement projects.
Known as FFIN 2023-1, the deal will float $237.3 million in asset-backed securities debt, with $275 million of receivables in the collateral pool, according to a pre-sale report from Kroll Bond Rating Agency.
It was not clear at press time which institution is managing the deal, but Goldman Sachs and Guggenheim Securities have acted as managers on all of the previous FFIN transactions dating back to 2017, according to the Asset Securitization Report's deal database. Guidance wasn't available either, but the FFIN 2021-2 transaction priced at 130 basis points over Swaps, according to the database.
The deal is the first of Foundation Finance's to come to market since the company gained a new chief credit and risk officer in January 2023, but that company-level change is just a small fraction of the changes that are happening at the structured credit level, KBRA said.
For one, the current transaction—the platform's seventh Rule 144A deal—does not have a prefunding period. The FFIN 2021-2 included a four-month prefunding period, and the transaction acquired additional receivables that represented up to about 38% of the final total, KBRA said.
Under the FFIN 2023-1, the rating agency assumed a 14% net recovery rate over 30 months, compared with 13% over the same period in the 2021-2. Also, the current transaction included a 'AAA' class of notes, with a commensurate level of higher credit enhancement than the 'AA-' rated class on the FFIN 2021-2. The 'AAA' tranche on the current deal has a credit enhancement level of 36.6%, while the most highly rated class in the 2021-2 deal, benefits from total credit enhancement of 25.85%.
Excess spread is far lower on the FFIN 2023-1, at 2.35%, than it was on the previous deal, 6.32%, according to KBRA. In this case, the weighted collateral interest rate dropped by -0.31% to 9.60%, while the note coupon increased by 3.67%, to 6.25%, according to KBRA.
Aside from the $175.5 million, class A notes KBRA expects to assign ratings of 'AA-' to the class B notes; 'A-' to the class C notes; and 'BBB-' to the class D notes. All of the notes have a final scheduled payment date of Dec. 15, 2043.
