Bankers Healthcare Group (BHG) is approaching the Rule 144a (ABS) market with its second asset-backed securities (ABS) offering this year that pools the revenue streams of consumer loans to high-income professionals, whose average FICO scores are lower in the current deal than previous transactions.
Led by Truist Securities, the $396 million BHG Securitization Trust 2025-2CON deal is split into five tranches, comprising $205 million in AAA-rated bonds, $122 million in AA, $30 million in A, $29 million in BBB, and $10 million in BB, according to Fitch Ratings.
Fitch noted the strong "but shifting" collateral pool. The weighted average income of the borrowers of loans in the pool is $248,284, up from $236,400, but the weighted average FICO is 733, down from 736 in a BHG Securitization Trust deal earlier this year, and 746 from last year's deal.
Fitch also noted that the current deal has lower credit-enhancement (CE) levels, a key strength of asset-backed transactions, than all BHG issuance going back to 2022. For example, the AAA-rated tranche's CE falls to 49.35% in the current deal from 57.10% in the offering earlier this year, and the AA tranche to 18.80% from 23.30%. The BB-rated tranche's CE remains the same in both deals, at 1.5%.
"The reduction in overall CE is driven by modest improvement in the consumer segment's default performance, resulting in lower Fitch default assumptions for some segments compared to past transactions, and the inclusion of class-specific overcollateralization (OC) targets," Fitch said.
In terms of deal strengths, Fitch notes limited data indicating marginally improving delinquency and gross-default rates in the 2023 and 2024 vintages of loans pooled in the current deal. It also pointed to BHG's long operating history dating back to its founding in 2001 that includes developing a proprietary credit scoring model and consistently targeting high-income borrowers.
Concerns, according to Fitch, include more longer-term loans and higher principal balances, as well as introducing certain types of riskier loans that were not present in the previous two securitizations.
