Purchasing Power is readying a $200.3 million securitization of revenue from a pool of retail installment sales contracts.
The sponsor does not offer loans to its obligors, but it partners with private and public sector employers to offer financing that is repaid through payroll deductions. These employers are its clients. To qualify for the program, obligors have to enroll in automatic payroll deductions or allotment and provide an alternative form of repayment in case they leave the company, according to ratings analysts at the Kroll Bond Rating Agency.
Purchasing Power generally targets large clients with more than 1,000 employees in industries with stable workforce—or low turnover, KBRA said. By industry, health care and social assistance, federal government/associations and manufacturing are the top three client groups, representing 27.9%, 14.7% and 14.2% of the pool, respectively. Those concentrations could increase to 32.5%, 22.5% and 20.0%, respectively.
Instead of charging interest on the receivables, Purchasing Power charges a mark-up on the products it offers as compared with the same product sold by other retailers, KBRA said. As of the initial consumer receivables' cutoff date, Jan. 21, 2024, a vast majority of the pool, 86.9%, are contracted to be paid over 12 months. The remaining receivables are paid over six to 18 months.
The receivables have an average outstanding amount of $537, and the top three clients represent 11.3%, 5.8% and 2.8% of the pool, respectively, KBRA said.
Purchasing Power Funding 2024-A's capital will issue classes A, B, C, D and E notes through five tranches. The A, B, C, D and E classes have initial credit enhancement levels of 52.53%, 40.27%, 28.73%, 20.81% and 12.72%, respectively, KBRA said. All of the notes through All of the notes have the same legal final maturity date, Aug. 15, 2028, the rating agency said.
The transaction includes a 24-month revolving period that ends on Feb. 16, 2026.
In terms of credit advantages, KBRA notes that payroll deduction loans have lower loss rates compared with similar unsecured loans not done through a payroll deduction/allotment plan. Purchasing Power can receive obligors' monthly repayment amounts before obligors receive their paychecks. Should a client terminate its agreement with Purchasing Power or not renew it, current payment deductions or allotments will continue, while not permitting any new purchases.
KBRA assigns ratings of AAA, AA, A, BBB and BBB- to the A, B, C, D and E classes, respectively.
