Channel Partners Capital is following up its inaugural equipment asset-backed securitization (ABS) deal with a $162.8 million transaction, again secured by small business loans and business cash advances. Proceeds from the transaction, CP EF Asset Securitization I, Series 2022-1, will help support its small business financing business.
Founded in 2009 to provide point of sale working capital finance to small businesses, Channel Partners launched its own finance offering in 2020, according to Kroll Bond Rating Agency.
The company sources originations through partners that are otherwise unable to finance them. The securitization portfolio consists of originations exceeding risk-based portfolio concentration limits for its partner firms, and originations that don’t fit a partner’s credit strategy, and originations from brokers.
Truist Securities and Regions Securities are initial purchasers on the deal, which will issue the notes through three classes. The class A and class B notes from CP EF Asset Securitization, 2022-1, will benefit from subordination levels of 15.1% and 3.5%, respectively.
Otherwise, the notes also benefit from overcollateralization and a reserve account that is funded at 1% of the initial pool balance at closing and which is non-amortizing, according to KBRA. The reserve account will grow as a percentage of the current pool balance over time.
The deal also has excess spread of about 1.12% per year. CP EF Asset Securitization I, Series 2022-1, will have a prefunding period of about three months following the closing date, around month’s end.
KBRA expects to assign ratings ranging from ‘A’ on the $134.8 million, class A notes to ‘BB’ on the $6.4 million, class C notes.
About 2,954 contracts will secure CP EF Asset Securitization I, Series 2022-1, according to KBRA, on a discounted pool balance they average $49,981. On a weighted average (WA) basis, the contracts had an original term of 55 months and an average seasoning of seven months.
The pool is highly diversified, with the top obligor accounting for 0.13%, and the top five representing 0.61%, KBRA said. When considered by state, the diversification remains consistent. Texas represents the largest percentage, with 12.5% and California, with 12.3%. Florida, Georgia and Illinois account for 9.4%, 5.1% and 3.6% of the pool, respectively.
The majority of equipment types in the deal were ‘other transportation,’ at 16.1%; construction, at 15.0%; trucking, at 14.5%; equipment-general categories, at 13.5% and trailers, at 10.8%, the rating agency said.