ABS

The deal includes a three-year revolving period when collections can be used to buy new collateral if it meets eligibility and reinvestment criteria.

A delinquency test requires that excess cash pay down the notes sequentially if the aggregate delinquent loans represent more than 5.0% of the portfolio balance's average loan balance.

The collateral pool includes more than 1.1 million passings across 10 states, with Georgia accounting for the largest percentage (31%).

Defaults have also bumped up, another problematic indication of stress for investors in securitizations of consumer loans.

A revolving pool of business loans and merchant advances secures the deal, and the revolving period ends on May 31, 2029, about 36 months after the initial closing date.

The transaction's debt service coverage ratio (DSCR) was calculated from a three-month lookback window of cash flows, shorter than the ABS transactions pre-COVID 19.

The market for so-called collateralized fund obligations could top $30 billion of new volume this year, up 50% from last year.

As lenders explore the adoption of FICO 10T and VantageScore 4.0, setbacks and data limitations remain.

Kapitus funds receivables through two revolving securitizations totaling $575 million, and a $230.1 million warehouse line of credit from Truist, which matures in June 2027.

Any additional securities that the transaction issues will rank equally with the class that has the same class designation.

Initially, the transaction will follow a sequential repayment structure that requires each note class to reach a required overcollateralization percentage before the next subordinate class begins receiving principal.

Notes will be backed by royalties from a music catalog containing more than 3,750 works from top artists and songwriters, including Diplo and ZZ Top.

Analysts expect the pool to be composed of receivables primarily from franchise dealers that offer indirect financing to consumers often overlooked by traditional financing sources such as banks.

The benchmark on the class A2 could change under certain circumstances, and the maximum allocation to the A2 notes will be 50% of the overall size of the A class.

Iskandar and Kaveh have a liquidity reserve of about $16.3 million at closing, and a cash-trapping trigger if the three-month average class A debt service coverage ratio (DSCR) falls below 1.45x.

Zayo Issuer, series 2026-1 and 2026-2, uses a master trust structure that will initially issue five tranches of classes A, B and C notes, and can issue additional classes if they meet certain conditions.

The sophomore outing follows a similar structure as the Clarus 2024-1, with six tranches of class A, B, C, D and E notes. The A2 tranche will issue the bulk of notes, $165.4 million.

The public and large institution segment make up 89.7% of obligors, up from the 87.7% seen in DEFT 2025-2, an increase that was driven largely by an increase in the large enterprise institution segment.

Banks have latched onto risk transfers in record numbers to gain regulatory relief that paved the way for new lending, acquisitions or shareholder payouts.

The deal increased its initial credit enhancement levels across the board, with the A-, BBB and BB- notes benefiting from levels of 21.89%, 1.89% and 5.74%, respectively.