OnDeck uses an online lending platform to originate small-business loans in the U.S. and through subsidiaries in Australia. So far, OnDeck has originated $15.3 billion in loans to more than 133,000 U.S. small businesses.
OnDeck Capital and ODK Capital are wholly-owned subsidiaries of Enova International, a Chicago-based publicly-traded fintech that provides online financial services through its machine learning-powered lending platform. Enova is focused on non-prime consumer lending, and to a lesser degree, small-business lending.
OnDeck Asset Securitization IV, Series 2023-1 is issuing three classes of Series 2023-1 notes (ODAS IV 2023-1), totaling $227.051 million. Closing on July 27, this is OnDeck's sixth small-business ABS securitization. ODAS IV 2023-1's collateral consists of small-business loans to a diverse set of industries, Kroll Bond Rating Agency said.
The proceeds will be used to fund the Series 2023-1 reserve account and to buy fixed-rate U.S. small-business loans originated through OnDeck's platform. The notes are "expandable" term notes, meaning that at any time during the revolving period, the issuer may periodically issue additional notes up to $378 million, KBRA said.
The transaction's servicer and seller is ODK Capital, the backup servicer is Vervent and the bank partner is Celtic Bank.
ODAS IV 2023-1 has a 36-month revolving period and is based on a pool balance of $250 million. It includes 5,887 loans with an average loan balance of $42,476, a weighted-average yield of 44.4% and a weighted-average FICO score of 723. The loans are relatively short-term with a weighted-average original term of 15 months and weighted-average remaining term of 11 months. The issuer can prepay the notes in full on any business day on or after Aug. 1, 2026.
KBRA's base case expected cumulative net losses for ODAS IV 2023-1 are approximately 52 basis points lower than the previous issue,
KBRA believes OnDeck and Enova, as the parent, have an experienced team and operational capabilities that were developed and tested through the 2007 financial crisis and the COVID-19 pandemic in 2020.
Initial credit enhancement consists of overcollateralization, subordination of junior note classes (except for class C), a cash reserve account and excess spread, KBRA said.
The transaction has initial hard credit enhancement levels of 43.18% for the class A, 20.68% for the class B and 9.88% for the class C notes. It benefits from credit enhancement levels that are sufficient to withstand KBRA's rating stresses, the rating agency said.
KBRA has provisionally assigned AAA to the class A notes, A- to the class B notes, and BBB- to the class C notes.
