Alterna Funding is preparing to sell $184.8 million in asset-backed securities (ABS) to investors, repaying the noteholders from revenue attached to a portfolio of 15,643 property tax liens.
The program doesn't come to market very often, and had completed just two other deals since 2014, according to the Asset Securitization Report's deal database and Kroll Bond Rating Agency. This transaction, Alterna Funding III, 2024-1, is due to close on May 30, and will issue two tranches of class A and B notes.
Cantor Fitzgerald is the sole structuring advisor on the deal, while Alterna Tax Asset Group, is the servicer. Both tranches of fixed-rate notes have a legal final maturity date of May 2039, KBRA said.
Alterna Tax Asset Group, based in Plantation, Fla., is a specialty finance company that services real estate tax liens purchased from government entities or third parties, KBRA said. The current portfolio is secured by tax liens from municipalities in eight states and Washington, D.C., that have a redemption value, or the approximate value of the outstanding liens, of about $119.6 million with an original lien rate of 12.2%, KBRA said.
Florida, New Jersey and New York account for the largest concentration of tax lien redemptive values representing 33.1%, 20.5% and 14.8%, respectively.
The tax liens generate revenue to secure the notes when the property owner redeems the lien and repays the redemptive value, plus any related interest and penalties, KBRA said. Two different reinvestment accounts are included in the transaction, KBRA said. The New Tax Lien Account can be used to purchase up to $70 million of tax liens within the first month of the closing date, while the Subsequent Tax Lien Account can purchase up to $5 million.
The B tranche confers subordination to the class A notes, at least, as one form of credit enhancement, the rating agency said. But they also benefit from overcollateralization, a cash reserve account, a working capital account and excess spread.
KBRA assigns AAA to the class A notes and A to the class B notes.
