Kapitus Asset Securitization 2022-1 is preparing to issue $200 million in asset-backed securities, collateralized by small business loans and merchant cash advances, in a transaction that is expandable. The trust can periodically issue additional notes up to a maximum of $600 million.
Kapitus has come to market twice before, according to a pre-sale report from Kroll Bond Rating Agency. In this, its third transaction, Kapitus Asset Securitization will use the proceeds from the bond issuance to pay off the SFS 2019-1 issuance, purchase receivables through its small business loan and merchant cash advance business, fund the reserve account and pay related fees and expenses, according to a presale report from Kroll Bond Rating Agency.
Specifically, three lines of receivables will secure the Kapitus Asset Securitization deal: future receivables from small- and medium-sized businesses; lines of credit, in which the originator agrees to purchase receivables occasionally; and business loans with fixed loans and terms, said KBRA .
Guggenheim Securities is the initial note purchaser on the deal, for which Kapitus will be servicer and Vervent will be a backup servicer. The notes will be issued through three classes of notes, and repay bondholders on a sequential basis.
KBRA expects to assign ratings to the notes ranging from ‘AA’ on the $166.7 million class A notes to ‘BBB’ on the $12.6 million class C notes.
Overcollateralization, subordination of junior note classes, a cash reserve account and excess spread will provide credit enhancement to the notes, the rating agency said. Overcollateralization on the deal is 5.0%. A non-declining reserve account will be funded on the closing date with an amount equal to 0.5% of the aggregate balance of the series 2022-1 notes, divided by 95.0%, KBRA said.
The trust will not have to obtain consent from existing note holders before expanding the transaction through additional note issuances, thus potentially diluting their existing control and voting rights.
Kapitus also includes a partial call option feature, KBRA said. Up to 30% of the notes may be redeemed for 103% par for the first 12 months of the deal, or 101% of par for the next seven months. Such a call would be applied pro-rata between the notes.
