Small- and medium-sized business loan provider Kapitus is returning to the credit markets to raise $70 million in asset-backed securities, in a deal where a higher expected charge-off rates and higher anticipated note coupons accounts for the greater credit enhancement level.
Guggenheim Securities is the lead manager on Kapitus Asset Securitization III, 2023-1, as it has on several of the most recent deals from the program, according to the Asset Securitization Report's deal database. A senior-subordinate structure will issue the notes to investors through four tranches, according to a pre-sale report from Kroll Bond Rating Agency.
The subordination does provide credit enhancement to the notes, KBRA said. As for over-collateralization and a reserve account, those levels are the same as the previous deal, the Kapitus 2022-3, the rating agency said.
Totaling $72.3 million, the initial pool balance is the second smallest to come from the program since the Kapitus 2022-1 deal, according to a KBRA comparison, but pool has held the line on a number of other important metrics. The maximum percentage of non-straight line receivables, for instance, is held at 50.0%. The pool also has a minimum total receivables weighted average yield of 30.00%.
On a weighted average (WA) basis, the borrowers had been in business for 14 years, an average credit score of 708, and the assets had calculated receivables yield of 38.9%, KBRA said. Factored receivables account for the majority of financings in the pool, at 61.6%.
Across the history of the Kapitus program, the issuer has financed a wide array of industries, and the current transaction is highly diversified. In the current deal, eating establishments accounted for 7.04% of the pool balance, offices and clinics of doctors another 4.51%, and special trade contractors accounted for 4.18%.
As for geographic diversification, California-based borrowers accounts for 14.25% of the pool balance, while Florida accounts for 13.56%, and Texas another 10.49%.
KBRA expects to assign ratings of 'AA' to the $45.8 million, class A notes; 'A' to the class B notes; 'BBB' to the class C notes and 'BB' to the $7.6 million, class D notes.
