Property tax lien assets from 13 states will collateralize a $140.9 million deal from First National Holdings, the fifth public term securitization from the program, and issues notes from a smaller pool than the 2021 transaction.
Two different reinvestment accounts will acquire assets for the trust. Funds in the New Tax Lien Account will purchase new tax liens during the nine-month reinvestment period, with $39.5 million deposited at closing, while the subsequent account will have an initial $6.5 million on hand to purchase subsequent liens, according to Kroll Bond Rating Agency.
Cantor Fitzgerald is the initial note purchaser on the deal, which has an initial redemption value of $106.7 million, lower than the initial redemption value of $118.7 million in the 2021 FNA VI, according to KBRA.
The lien count is higher than the previous deal, with 8,352, compared with 7,286.
The deal has a number of strong characteristics to support the timely repayment of notes. For one, tax liens have a statutory "super-priority" lien position in a property's repayment order, even to a previously filed mortgage, according to KBRA. On a weighted average (WA) basis the portfolio has a lien-to-value of 12.84%, with a WA overbid LTV of 15.51%, the rating agency said. Overbid amounts are returned on redemption in New Jersey.
The trust will issue one class of notes, which earn an 'A' rating from KBRA. The rating agency noted that the structure includes overcollateralization, an expense reserve account, the new and subsequent tax lien asset accounts, and excess spread.
There is one important limit to the excess spread element, KBRA noted. It is not available for amortization. Unlike other tax lien securitizations with a so-called, full-turbo structure, the transaction allows for excess interest collections, but only certain conditions will make them available in connection with principal amortization.
