Structured Finance Advisors (SFA) served as the sole advisor in structuring and coordinating investors on a $111 million structured finance transaction.
The transaction was backed by a pool of asset based loans and factoring receivables originated by First Capital Corp. of Florida. SFA structured this deal in three tranches with the senior tranche rated 'AA', the junior bonds rated 'BBB', and an equity tranche retained by the company which was not rated. The term of the deal is a three-year interest only period with a twelve-month amortization thereafter.
“This deal was done in the 144-A private placement market and caps off months of hard work by the company and SFA,” said Joe Lorusso, president of SFA, adding that, the transaction "is the first step in re-establishing the off-the-run asset-backed market.”
He believes that this offering is a breakthrough transaction since it is "off the beaten path" from credit card and auto deals, which seem to be the only sectors available in this new ABS market. He said that, “the market has gone back to the practices of the early 1990s, when deals like First Capital were done with time for investors to perform due diligence and meet with the company’s management to ask thorough questions.”
Lorusso believes that the ABS market will emerge healthier and again become a market where companies with all types of assets could issue securitizations and tap this vital source of funding. He is quick to point out, however, that deals will have a longer time to closing but will result in a healthier market due to better structures and better matching of issuers with investors who understand the transaction.
SFA also supplies customized surveillance reports to investors who invest in deals that SFA works on. SFA was first to publish reports on complex structured finance deals for its investors and the firm is continuing that work with the new private placement issues. Lorusso thinks that, “monitoring and surveillance, if given the importance it deserves from investors, is a key management tool.”
Investors share in his belief, as SFA has been publishing its surveillance reports for investors around the world since 1993.
Lorusso said that SFA is excited about doing deals again with sophisticated investors where all parties could take the time to analyze the assets and structure a sound deal that ultimately provides good companies the capital they need to grow.
He is optimistic about the future of the private ABS market, saying that “it feels like the market is starting to emerge from a very painful and speculative period, and the closing of this deal is leading the way to a better ABS market.”