ABS

The securitization has a reserve account of 1% of the initial series note balance funded fully at closing.

The transaction sponsored by Hospitality Investors Trust has a strong credit profile because of the diverse properties, well-known hotel brands and strong management involved, analysts say.

The Class A note coupon initially will be linked to the USD Compounded Secured Overnight Financing Rate Index, a relatively new interest rate index. Royal Bank of Canada is the seller, servicer and administrative agent.

Amid reduced M&A activity, U.S. middle-market borrowers and investors in asset-backed securities are trying to reset and figure out where the right valuations levels are, says Sengal Selassie, CEO of Brightwood Capital Advisors, a lender and issuer of CLOs.

The transaction features two potential securitizations of collateral pools valued at approximately $1.11 billion and $1.32 billion, with bonds totaling $1.01 billion and $1.20 billion.

As of the May 31, 2022 cut-off date, 95.6% of the loans were current, of which 2.1% are bankruptcy-performing loans and 4.4%, 30 days delinquent.

Questions remain around switching benchmarks that could result in unexpected refinancings

Compared to the baseline macroeconomic scenarios updated in March, near-term growth outlooks have deteriorated across most DBRS Morningstar-rated sovereigns worldwide.

Loan forgiveness would help offset FFELP student loan ABS low prepayment rates and maturity risk, a primary driver of rating downgrades since 2016.

About 79% of the loans in the collateral pool were made to borrowers without full documentation, while 34% of the loans in the pool were underwritten to bank statements.