Time Investment Company is preparing its inaugural securitization, a deal that will sell $114.6 million in notes supported by income from home improvement loan, mostly to purchase and install home water treatment systems.
TIC Home Improvement Trust 2024-A, as the deal is known, will issue notes through three tranches representing A, B and C classes of notes, according to Kroll Bond Rating Agency. All of the notes have a legal final maturity date of Oct. 15, 2046, but their initial levels of credit enhancement are all different. The class A, B and C notes, respectively, have levels of 22.40%, 16.95% and 10.90, KBRA said.
Pricing guidance on the transaction, for which KeyBanc Capital Markets is acting as manager, ranges from a spread of 225 basis points over the three-month interpolated yield curve on the class A notes to the 775 over the three-month, I-Curve, according to the Asset Securitization Report's deal database.
Initial and target overcollateralization on TIC 2024-A is 10.40%, which is subject to a floor of 2.00% of the initial collateral balance, including amounts in the prefunding account. There is also a cash reserve account funded at closing to equal 0.50% of the aggregate contract balance of receivables, subject to a floor of 0.25% of the initial pool balance, KBRA said.
TIC 2024-A also has a prefunding period, which will end at the earlier of six months after the transaction's close or when a default event occurs. Excess spread is about 3.38%, based on an assumed weighted average (WA) interest rate of 11.73%, minus 1.00% in servicing fees, and a WA life adjusted note coupon of 7.45%, KBRA said.
Founded in 1982 and based in West Bend, Wisc., the company targets loan amounts that range between $2,000 to $50,000, with an average of about $8,700. While the company offers loans for water treatment systems, HVAC systems, and other types of home improvements, home water treatment systems account for 60.1% of the portfolio. Typically, Time Investment's customer is a homeowner with a FICO score of about 730 on a WA basis, and a WA income of about $95,000.
For the current pool, composed of 12,236 loans, analysts said, borrowers have a FICO score of 733 on a WA basis. The WA coupon is 11.65%, with an average balance of $7,519. The loans have a WA original term of 133 months, with a remaining term of 118 months on a WA basis, KBRA said.
KBRA says assigns ratings of A on the class A notes, BBB on the class B notes and BB on the class C notes.
