A pool of merchant cash advances and small business loans will provide collateral for $80 million in asset-backed bonds, as Kalamata Capital Group prepares its first securitization deal.
Kalamata Capital Group, with offices in New York City and Bethesda, Md., was founded in 2013 and provides financing to small- and medium-sized businesses along with Black Olive Capital, according to Kroll Bond Rating Agency. The company provides loan approvals for up to $750,000 within three hours and facilitated paycheck protection program loans up to $2 million during the COVID-19 pandemic, according to the company's website.
KCG Securitization 2024-1 will issue notes through two tranches, a class A and a class B class each, according to the Asset Securitization Report's deal database. Class B, issuing $9 million in notes, will provide subordination to the A notes.
KBRA assigns ratings of BBB and BB to classes A and B, respectively, and both tranches have the same legal final maturity date of Sept. 15, 2029.
Proceeds from the sale of notes will purchase receivables, fund the reserve account, and pay related fees and expenses. Under Kalamata's current capital structure, the company funded its financing by selling participation interests to investment funds that Kalamata Asset Management, a registered investment advisor recognized by the Securities and Exchange Commission, manages. Kalamata manages two funds, an offshore feeder fund and an onshore fund, with total assets of $160.3 million.
KCG 2024-1 has a revolving feature that will end on either the earlier of Feb. 28, 2027 and the date of a rapid amortization, if one occurs. During the revolving period the trust will repay interest to investors sequentially, but during the amortization period it will repay interest first and then principal sequentially.
A non-declining reserve account, funded with an amount equaling 0.80% of the aggregate balance, will also provide protection to the notes, KBRA said.
The notes benefit from several forms of credit enhancement, including initial and required overcollateralization of 7.8%. There is also 44.4% in excess spread. If the trust fails to maintain excess spread above certain levels, that condition will trigger a rapid amortization event, the rating agency said.
