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Powersports lender launches debut recreational vehicle ABS

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Octane Lending, a finance specialist in powersports and outdoor vehicles, is debuting a new securitization of retail installment contracts funding the purchase of offroading and other recreational vehicles.

Octane Receivables Trust 2019-1 is a $210.9 million transaction involving fixed-rate loans to prime and non-prime borrowers financing the purchase of all-terrain and utility-task vehicles, as well as dirt bikes, motorcycles, mowers, tractors, snowmobiles and personal watercraft, according to a presale report from Kroll Bond Rating Agency.

The New York-based company lends through its operating subsidiary, Roadrunner Financial, which has partnerships with over 40 original equipment manufacturer brands.

Octane will use the proceeds from the notes sale to pay down existing debt and for general operating purposes, Kroll reports.

The deal’s senior notes are in a $154 million Class A tranche with a preliminary A rating from Kroll. The notes benefit from 33.45% credit enhancement.

Kroll noted the deal carries unique risks compared to auto-loan ABS transactions. “Unlike an auto loan, which is a necessary form of transportation for many borrowers, powersports equipment is a discretionary purchase and does not provide the same utility," the report stated. "In times of economic stress, a borrower may default earlier or at a higher rate on debt related to discretionary assets compared to debt related to necessary assets.”

The collateral pool involves $228 million in loans with an average balance of $9,621 and weighted average APRs of 13.89%.

The securitization is the first for Octane, founded in 2014 under former executives for Capital One and GE Capital Consumer. The company reported a net loss of $11.32 million for the eight months through the end of August 2019, according to Kroll; the company had available cash of $16.9 million as of Aug. 31, as well.

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