A portfolio of unguaranteed interests in 7(a) loans from the Small Business Administration (SBA) loans will secure the sale of $115.7 million in asset-backed securities to investors from the Harvest Small Business Loan Trust 2023-1.
Guggenheim Securities is the structuring lead and sole bookrunner on the deal, although a closing data had not been announced by press time, according to ratings analysts at Kroll Bond Rating Agency.
The transaction will issue notes through three tranches of notes, according to the KBRA pre-sale report. All of the notes, which have an adjustable rate, will have the same final maturity date of October 2050, KBRA said. Harvest Small Business Finance, the transaction sponsor, has been originating loans since 2016, and is itself majority owned by an affiliate of Medalist Partners, an investment manager with about $2.1 billion of net assets.
The deal has a prefunding account with $12 million deposited at closing, and will use that amount to purchase additional collateral during its 90-day period after the deal closes, according to KBRA. Some 529 loans are in the collateral pool, and they have a total unguaranteed balance of $121.3 million, about 21% of the loans' full outstanding current principal balance, the rating agency said.
All loans in the Harvest SBA Loan Trust pool amortize with monthly payments, with floating rates with a margin of up to 3.00%, and based on the Prime rate. Also, the loans have original terms of either 10, 15, or 25 years, and the obligors have FICO scores with a weighted average (WA) score of 729.
The notes have several forms of enhancement, including subordination, overcollateralization, a cash reserve account and a capitalized interest account. The OC is expected to be 13.23%, while the reserve account is fully funded at closing at 1.50% of the sum of the initial pool balance and prefunding account. Excess spread also provided enhancement to the notes, KBRA said. The WA yield at origination of the cutoff date pool is about 10.6%.
KBRA expects to assign 'A-' to the class A notes; 'BBB-' to the class B notes; and 'BB' to the class C notes.
