KBRA assigns preliminary ratings to three classes of notes issued by CP EF Asset Securitization I, LLC, Series 2022-1 (“CPEF 2022-1”), an equipment ABS transaction.
CPEF 2022-1 represents Channel Partners Capital, LLC’s (“CPC” or the “Company”) first equipment ABS following the Company’s inaugural ABS transaction, CPC Asset Securitization I Series 2021-1 (“CPC 2021-1”) in December 2021. CPC 2021-1 was collateralized by small business loans and business cash advances. The Company, which was founded in 2009, focused on providing point of sale working capital finance to small businesses during the first ten years of its history. This strategy resulted in CPC working with and developing relationships with equipment finance partners.
Beginning in 2020, CPC launched its own equipment finance offering. Originations are sourced through CPC’s network of equipment finance company partners, which refer business to CPC for both working capital finance as well as for equipment finance. CPC generally funds originations that its partners are unable to finance, and the current portfolio consists mostly of the following: 1) originations in excess of risk-based portfolio concentration limits for a partner (for example obligor or industry limits) 2) originations that don't fit a partner's credit strategy and 3) originations from brokers.
The discounted pool balance represents the discounted value of the projected cash flows of the contracts included in the collateral pool using a discount rate based on the interest rate on the notes plus fees and other amounts. As of May 31, 2022, based on a discount rate of 9.13%, the discounted pool balance is $147.6 million (“Statistical Pool”). The transaction also features a prefunding account of approximately $33.2 million that may be used to purchase additional contracts during the three month period following the closing date.
CPEF 2022-1 will issue three classes of notes. Credit enhancement includes excess spread, a reserve account, overcollateralization and subordination for senior classes. The overcollateralization is subject to a target equal to 22.75% of the current pool balance and a floor equal to 0.50% of the initial pool balance. The reserve account is funded at 1.00% of the initial pool balance and is non-amortizing.
- Equipment Lease and Loan Global ABS Methodology
- Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
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