Tax Ease Holdings is marketing $141.75 million of bonds backed by tax liens.
Tax liens are given a statutory “super-priority” lien position that is superior in payment priority, even to a previously filed mortgage. The initial collateral pool is comprised of property tax lien certificates from municipalities within the states of Florida, New Jersey, Ohio, South Carolina and Texas.
The deal, Tax Ease Holdings 2016-1, will issue two tranches of notes with a legal final maturity of December 2028. Kroll Bond Rating Agency has assigned a preliminary ‘AAA’ to $134.5 million of class A notes and a ‘A’ to $7.25 million of class B notes.
The transaction features $28 million account that can be used to fund additional tax liens on new properties that meet certain eligibility criteria up to nine months after closing. There is a separate, $20 million account that can be used to purchase subsequent tax liens on properties already subject to tax liens in the initial pool, as well as subsequent liens on properties purchased with funds from the new tax lien account.
MTAG Services is the servicer. Guggenheim Securities is the initial purchaser.
The Company has been purchasing delinquent tax liens since its inception in 2003.
Over the past 12 years, the company has acquired over $440 million of tax lien assets in its five core states: (Florida, New Jersey, Ohio, South Carolina, and Texas. The majority of the transaction’s initial portfolio relates to Ohio (50.5%), Texas (28.9%) and Florida (16.8%).
Since Tax Ease’s inception, approximately $6.8 million of tax liens by principal value related to the jurisdictions contained within this transaction have become real-estate owned, or repossessed by banks, representing about 1.5% of aggregate originations. KBRA views the transaction’s collateral as strong based upon the superior payment priority position, low portfolio LTV ratio and Tax Ease’s historical loss experience.
The portfolio has an LTV of approximately 12.3% and the weighted average overbid LTV ratio is approximately 12.4%, which KBRA views as a strong credit positive
Approximately 8.0% of the total redemptive value of the tax lien portfolio consists of Ohio properties where the Company has determined to initiate foreclosure proceedings. KBRA believes that the risk relating to these particular tax liens is largely mitigated by the lower advance rate of the notes against this collateral.