ReadyCap Lending LLC is marketing its first small business loan securitization of the year.
The transaction, called ReadyCap Lending Small Business Loan Trust 2015-1, will offer $114.832 million of securities backed by an amortizing pool of the unguaranteed portion of loans made under Small Business Association (SBA) 7(a) loans. Final maturity is set for December 25, 2038.
JP Morgan Securities is the lead underwriter on the deal.
The transaction benefits from credit enhancement of initial overcollateralization at 39.4% and a reserve account that will be funded over time with 90 days’ interest on the loan-backed notes, according to Standard & Poor’s.
S&P has assigned its AAA’ rating to the series 2015-1. In its presale report published June 9, S&P said it considers the collateral portfolio to be strongly diversified and ReadyCap’s management to be experienced.
Among the transactions weaknesses, according to S&P, is the fact that ReadyCap Lending did not originate the loans, but instead acquired them from CIT or the Federal Deposit Insurance Corp. Moreover, ReadyCap did not re-underwrite the loans when it acquired them.
“Collateral was originated between 1994 and 2014. During this time, underwriting standards may have varied,” it noted.
Also, the rating agency said that commercial properties securing 13% of loans in the pool are simultaneously securing other loans outside of the pool. The obligations are equally managed regarding payment to collateral.
On the flip side, the fact that 85% of the collateral is more than five years seasoned is a strength. “We have observed that defaults typically increase the first year after origination and remain elevated for a few years before declining during the remaining years of the loan's life,” the presale report states.
The deal is expected to close June 16.
