A “second-look” financing partner for retailers like Home Depot and Sears Home Pro is marketing its first securitization of consumer credit loans since 2004.
Alanticus Holdings Corp. – an Atlanta-based specialty finance firm formerly known as CompuCredit Corp. – is offering $167.28 million in notes secured by receivables on consumer card and charge accounts totaling $200.6 million, according to a presale report from Kroll Bond Rating Agency.
The deal is dubbed Fortiva Retail Credit Master Note Business Trust 2018-One, from its revolving master trust platform that collateralizes loans issued through Atlanticus’ seven-year-old Fortiva Retail Credit platform.
The transaction includes $139.9 million in Class A notes that have an initial single A rating from Kroll. The bonds benefit from 20.55% credit enhancement. Alanticus is also offering $15.7 million in Class B notes (BBB) and $11.7 million in Class C (BB).
All of the notes have five-year tenors.
Kroll has a base-case loss rate scenario range of 14.11%-16.11%.
The $200.6 million in collateral is spread across 146,080 accounts with an average balance of $1,205, interest rate of 26.08% and a weighed average FICO of 645.
According to Kroll, the Fortiva credit platform offers point-of-sale financing to consumers declined by a merchant’s primary credit financing options. It has 1,260 retail partners across sectors such as home improvement, consumer electronics and furniture, but more than 51% of the Fortiva 2018-One pool consists of loans through just five retailers. The largest is Home Depot at 27.5% of the initial pool.
Sears Home Pro makes up 8% of the pool, but the company does not believe the October Chapter 11 bankruptcy filing of parent firm Sears Holdings will have any significant impact on the deal’s performance.
The transaction includes a two-year revolving period in which additional qualifying loans can be added up to the initial pool amount. No principal will be paid on notes during that time.
Since nearly 21% of the collateral are loans subject to interest-free promotional periods between six and 12 months, Altanticus will reclassify about 10% of the principal receivables to avoid an early redemption clause that would be triggered by a low excess spread.
Atlanticus (Nasdaq: ATLC) has been around for 22 years, issuing more than $25 billion in general purpose and private-label retail credit cards.
Over the past five years, the company has boosted originations from $20.3 million in the first quarter of 2013 to $385.7 million in the third quarter this year. It once primarily underwrote loans for retail installment contracts through Fortiva, but has boosted the level of complementary general purpose credit-card originations in the past two years (not included in the current transaction).
Just under $250 million of the third quarter volume was originated through the Fortiva retail program.
Series 2018-One is the company’s first term ABS of its own collateral in 14 years; prior to that, it issued four transactions. In the interim, Atlanticus financed itself through seven credit facilities totaling $327 million, with $221.6 million outstanding as of June 30, plus two variable funding notes series secured by receivables that are controlled by external capital (TowerBrook Capital Partners and Credit Suisse). The variable notes programs have $98.1 million in combined outstanding balances.
Kroll noted four of the amortizing debt facilities are expiring next year, with an outstanding balance of $49.9 million.
The report did not disclose the use of proceeds from the transaction.
