NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns a preliminary rating of AA(sf) to HERO Funding Trust 2015-2 Class A Notes (HERO 2015-2). The notes are newly issued asset-backed securities backed by a portfolio of Property Assessed Clean Energy (PACE) bonds.
The notes are secured by 18 limited obligation improvement bonds, issued by Western Riverside Council of Governments (WRCOG) and San Bernardino Associated Governments (SANBAG). The PACE bond portfolio is secured by 7,558 PACE assessments levied against 7,456 residential properties located in 26 California counties. The average PACE assessment is $21,795 with an average annual payment of $3,024. The transaction benefits from credit enhancement in the form of excess spread, overcollateralization, and a liquidity reserve.
KBRA analyzed HERO 2015-2 using the General Rating Methodology for Asset-Backed Securities published on July 30, 2012. PACE assessments fall within Category 1: Financial Assets. The key determinants considered in the rating outcome are: a structural and legal analysis of the transaction; the treatment of PACE assessments as senior tax liens; and the creditworthiness of the Counties acting as servicer.
KBRA believes the transaction benefits from sufficient credit enhancement and a structure that accelerates principal payments to the rated notes upon weakening asset performance. In addition, KBRA views the eligibility requirements, especially the low LTV of the PACE assessment, as a positive credit consideration for this transaction.
|Class||Rating||Initial Principal Balance|
|Class A Notes||AA (sf)||$159,783,000|
About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).