The City of New York is making its annual trip to the securitization market with tax liens.
The deal, dubbed NYCTL 2016-A , will issue a single, $64.9 million tranche with a preliminary ‘AAA’ rating from Kroll Bond Rating Agency. The stated maturity date is November 2029.
J.P. Morgan Securities is the placement agent. MTAG Services and Tower Capital Management are the servicers; each is responsible for assuming the duties of the other servicer if its role is terminated.
The city passed legislation permitting it to sell delinquent property tax liens in 1996; since then, it has completed 21 term securitizations, 20 of which have fully repaid bondholders and one of which remains outstanding and is making timely payments. In its presale report, KBRA said cited this longevity and performance reflects the strength of the underlying assets and program.
The collateral pool for the latest transaction is comprised of 3,405 property tax liens with an aggregate initial adjusted redemptive value (equal to the redemptive value plus recoverable lien administration expenses) of approximately $84.4 million. The liens arose from unpaid real property taxes, assessments, sewer rents, sewer surcharges, water rents and other charges.
Tax liens are given a statutory “super-priority” lien position that is superior in payment priority, even to a previously filed mortgage. The weighted average lien-to-value ratio of the portfolio is 10.2%, which KBRA also views as positive.
The weighted average age of the initial collateral pool is approximately 55.2 months. The borough of Brooklyn represents approximately 40.7% of the initial pool by redemptive value, while Queens, the Bronx, Manhattan and Staten Island represent 21.8%, 17.8%, 14.7% and 5.0%, respectively.