KBRA Assigns Preliminary Ratings to Foundation Finance Trust 2017-1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Foundation Finance Trust 2017-1 (“FFT 2017-1”), a consumer loan asset-backed securities transaction that expected to close on December 15, 2017.

This transaction represents the second ABS securitization for Foundation Finance Company LLC (“Foundation” or the “Company”) collateralized by a pool of retail installment sale contracts and agreements (“Contracts”) primarily used for home improvements. Foundation was founded in 2012 through the partnership of an experienced management team and Garrison Investment Group (“Garrison”). Foundation is approximately 99% owned by Garrison, a leading middle-market credit and asset based investment management firm with approximately $3.3 billion in assets under management as of September 30, 2017.

Foundation acquires contracts from dealers who originate contracts by providing point-of-sale financing to consumers that are typically creditworthy homeowners making a discretionary purchase to improve the value of their home. Dealers are contractors or retailers that focus on home improvement products and services that include: roof replacements; heating, ventilation and air conditioning; windows; siding; and water treatment products. Foundation directly funds the dealers and does so only after project completion to ensure the usage of proceeds is for home improvements.

The transaction has initial credit enhancement levels of 26.25% for the Class A Notes, 17.00% for the Class B Notes, and 8.00% for the Class C Notes. Credit enhancement consists of overcollateralization, excess spread, a reserve fund funded at closing, and, in the case of the Class A Notes, subordination of the Class B and the Class C Notes. In the case of the Class B Notes, subordination of the Class C Notes.

KBRA applied its U.S. Consumer Loan ABS Rating Methodology for Asset-Backed Securities as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and Foundation’s historical gross loss data. KBRA also conducted an operational assessment of Foundation, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.

Preliminary Ratings Assigned: Foundation Finance Trust 2017-1

       
Class   Preliminary Rating      

Expected Initial Class
Principal

A   AA (sf)       $216,730,000
B   A (sf)       $27,000,000
C   BBB- (sf)       $26,270,000

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled Foundation Finance Trust 2017-1 Representations and Warranties Disclosure

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full credit rating agency 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). KBRA Europe is certified and registered with the European Securities and Markets Authority (ESMA).

Contacts

Kroll Bond Rating Agency
Analytical:
William Carson, 646-731-2405
Senior Director
wcarson@kbra.com
or
Haksun Kim, 646-731-2412
Director
hkim@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com
or
Michael Polvere, 646-731-3339
Analyst
mpolvere@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical:
William Carson, 646-731-2405
Senior Director
wcarson@kbra.com
or
Haksun Kim, 646-731-2412
Director
hkim@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com
or
Michael Polvere, 646-731-3339
Analyst
mpolvere@kbra.com