KBRA Gives Preliminary Ratings to Channel’s First Equipment ABS Deal

Kroll bond rating agency has assigned preliminary ratings to three classes of notes issued by CP EF Asset Securitization I, Series 2022-1 (CPEF 2022-1), a physical asset-backed securitization transaction.

CPEF 2022-1 represents Channel Partners Capital’s 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 has been secured by small business loans and business cash advances.

Founded in 2009, Channel Partners Capital has focused on providing point-of-sale working capital to small businesses for the first 10 years of its history. This strategy has allowed Channel Partners Capital to work and develop relationships with equipment financing partners.

Starting in 2020, Channel Partners Capital launched its own equipment finance offering. The origins come from Channel Partners Capital’s network of equipment finance companies, which refer business to Channel Partners Capital for working capital financing as well as equipment financing. Channel Partners Capital funds arrangements that its partners are unable to fund, and its current portfolio consists primarily of arrangements that exceed the risk-based portfolio concentration limits for a partner (e.g. obligor or debtor limits). sector), arrangements that do not correspond to a partner’s credit strategy and broker originations.

The discounted pool balance 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 May 31, 2022, based on a discount rate of 9.13%, the discounted pool balance is $147.6 million (statistical pool). The transaction also includes a pre-funding account of approximately $33.2 million that can be used to purchase additional contracts during the three-month period following the closing date.

CPEF 2022-1 will issue three classes of tickets. Credit enhancements for the transaction include excess spread, reserve account, overcollateralization and subordination for upper classes. Overcollateralization is subject to a target equal to 22.75% of the current pool balance and a floor equal to 0.5% of the initial pool balance. The reserve account is funded at 1% of the initial pool balance and is not amortizable.

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