Octane Lending, which provides consumer financing for powersports and outdoor power equipment through dealerships, is preparing to sponsor $326.4 million in asset-backed securities.
Six tranches of notes will be sold to investors through the Octane Receivables Trust, 2024-3 transaction, from a pool of contracts that finance a range of vehicles an equipment, including all-terrain vehicles, tractors, trailers and cruisers, according to ratings analysts at Kroll Bond Rating Agency.
The notes have legal final maturity dates ranging from Nov. 20, 2025 on the A1 notes through Nov. 22, 2032 on the class E notes, KBRA analysts said. The A1, A2, B, C, D and E tranches benefit from initial credit enhancement levels of 27.2%, 27.2%, 20.5%, 14.2%, 7.6% and 4.5%, respectively.
Credit enhancement includes subordination, and an initial overcollateralization of 4.0%, which can build to a target of 12.9%. The current deal, OCTL 2024-3, has a reserve account of 0.50%, down from 0.75% on the OCTL 2024-2.
Compared with the 2024-2 transaction, where 75.89% of the underlying contracts was made to borrowers in the lender's prime risk tiers, the current deal has a higher concentration, with 84.91%, KBRA said.
The contracts and installment loans were extended to prime and non-prime borrowers, most of which (81.49%) are financing new vehicles as of the deal's closing date, KBRA said. Octane financed the loans through more than 40 partnerships original equipment manufacture brands, with Roadrunner Financial as the originator, the rating agency said.
On average, the loans in the pool have a balance of $12,375. On a weighted average (WA) basis, the loans have a coupon of 10.28%, a FICO score of 744 and an average loan-to-value (LTV) score of 109.6%.
KBRA assigns ratings of K1+ and AAA to the A1 and A2 notes, respectively; and AA+, A+, BBB+ and BB+ to classes B, C, D and E.
