A portfolio of revolving receivables bought from small- and medium-sized businesses and fixed-rate business loans will secure $50 million in asset-backed securities issued from the Kapitus Asset Securitization Series 2022-3.
The deal is the first series of notes from the Kapitus Asset Securitization II, LLC, but the fifth series of notes from the sponsor, according to a pre-sale report from Kroll Bond Rating Agency. Guggenheim Securities will be the initial purchaser of the notes, which the trust will issue through a senior-subordinate capital structure, and which will repay noteholders sequentially.
Also, the Kapitus Asset Securitization notes are expandable term notes, where at any time during the revolving period—and after meeting certain conditions—the issuer has the ability to issue additional notes, up to a maximum of $500 million.
With offices in New York and Arlington, Va., formerly known as Strategic Funding Source, Kapitus makes loans to small- and medium-sized businesses through its proprietary risk scoring models, and to a wide array of industries throughout the United States. To qualify for funding, merchant borrowers must meet certain lending criteria, such as be operating in an approved industry, be in business for at least six months, have a minimum credit score of 500, maintain a minimum daily balance of $1,000 in its main business bank account, and provide three full months of bank statements.
KBRA notes that Kapitus' typical merchant profile consists of borrowers with a FICO score of 704, original term of 19.2 months, a factor rate of 1.37x, all on a weighted average basis, and $47,843 in financing.
Aside from the subordination of the junior notes, Kapitus Asset KBRA expects the notes to benefit from excess spread. The rating agency notes that weighted average receivables have a yield of 36.2% at origination, helping result in significant excess spread. Failure to maintain excess spread in the notes will trigger a rapid amortization event.
Otherwise, the notes will also benefit from overcollateralization, a non-declining reserve account equal to 0.50% of the series' aggregate balance, divided by 95.0%.
KBRA expects to assign 'AA' ratings to the $36.6 million, class A notes; 'A' to the $5.8 million, class B notes; 'BBB' on the $4.9 million, class C notes and 'BBB-' on the $2.4 million, class D notes.
