KBRA Gives Preliminary Grades to Marlin Leasing’s 12th ABS Gear

Kroll bond rating agency assigned preliminary ratings to six rating classes issued by Marlin Receivables 2022-1 (Marlin 2022-1), a securitization transaction based on physical assets of Marlin Leasing.

Marlin 2022-1 represents Marlin Leasing’s 12th ABS equipment. Marlin Leasing, a wholly owned subsidiary of Marlin Business Services, is an independent commercial finance company founded in June 1997 to create and manage low-cost equipment leases. Beginning in 2015, Marlin Business Services’ creations expanded into Marlin Leasing’s subsidiary, Marlin Business Corporation (formerly known as Marlin Business Bank), to include an unsecured working capital loan product with primarily the same accounts receivable as the low cost equipment rental product. Marlin Leasing’s previous ABS equipment, Marlin Receivables 2018-1, closed in July 2018 and has been fully repaid. Prior to the 2018 issuance, Marlin Leasing had not issued an equipment ABS since February 2010.

Marlin 2022-1 will issue six categories of notes, including a short-term tranche. Credit enhancement for notes includes excess spread, reserve account, overcollateralization and, for higher classes, subordination. Overcollateralization is subject to a target equal to 12% of the current pool balance and a floor equal to 1% of the initial pool balance. The reserve account is funded at 0.5% of the initial pool balance and is not amortisable. The overall initial principal amount will be $695.27 million (large pool) or $500.55 million (small pool). The Sponsor will make the decision regarding the aggregate initial principal amount of the Notes based on, among other considerations, market conditions and investor demand at the time of pricing.

The aggregate securitization value (ASV) represents the present value of the projected cash flows of 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 April 30, based on a discount rate of 5.78% for equipment loans and leases, the aggregate securitization value (statistical ASV) will be $759.06 million for the large pool or of $546.47 million for the small pool. Statistical ASV will include cash flows from three types of origination: low budget equipment contracts (93% large pool/91% small pool), equipment contracts funding medium to third-party initiated large budget loans purchased by Marlin Leasing (5% large pool/7% small pool) and working capital loans issued by Marlin Business Corporation and purchased by Marlin Leasing (3% large pool/3% small pool) .

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