RFS, a specialty finance company composed of Rapid Financial Services and Small Business Financial Services, is returning to the securitization market to raise $160 million in asset-backed bonds secured by revenues from a mix of factored receivables, business loans and lines of credit.
The RFS Asset Securitization II LLC, series 2024-1, will issue five tranches of classes A, B, C, D and E notes to investors, according to ratings analysts at Kroll Bond Rating Agency. Initial credit enhancement ranges from 49.43% on the class A notes to 2.50% on the class E notes, according to the rating agency. All the notes have the same legal final maturity date, July 2029.
At any point during the deal's three-year revolving period, RFS can purchase additional receivables that meet the deal's eligibility requirements and concentration limits. A trigger event will happen, however, if the transaction's yield, excess spread or delinquent level breaches its trigger level, KBRA said. Also, the notes are expandable so that at any time during that revolving period the issuer can upsize the notes to a maximum of $500 million across the deal.
Existing noteholders will not have to consent to the upsizing, also, according to KBRA.
As for the collateral, fixed-rate business loans made to merchants make up 91.5% of the pool as of the March 31, 2024 cutoff date, but that ratio could change during the revolving period, according to KBRA, and there is no percentage cap for this asset.
The pool also includes future receivables purchased from small- and medium-sized businesses, and here are commonly known as merchant cash advance assets. Factored receivables make up 2.3% of the statistical collateral pool as of March 31, 2024. That might change during the revolving period, however, because there is no percentage limit on those types of assets in the pool.
Finally, the collateral includes up to 6.3% of lines of credit made to merchants with fixed terms. There are concentration limits for this asset, 50%, unlike future receivables and business loans, the rating agency said.
KBRA assigns AA, A, BBB, BB- and B+ to classes A, B, C, D and E, according to KBRA.
