NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Foundation Finance Trust 2019-1 (“FFIN 2019-1”), a consumer loan asset-backed securities transaction that expected to close on April 2, 2019.
This transaction represents the third 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. The Company completed one securitization in 2016 and 2017. 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 $3.5 billion in assets under management as of December 31, 2018.
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 make a repair or improve the value of their home. Dealers are contractors or retailers that sell home improvement products and services that include: windows; roof replacements; heating, ventilation and air conditioning systems (“HVAC systems”); siding; and water treatment products. Foundation, in the majority of cases, funds the dealer directly after project completion to ensure the proceeds are used for the contracted home improvement.
The transaction has initial credit enhancement levels of 23.90% for the Class A Notes, 15.15% for the Class B Notes, and 7.50% for the Class C Notes. Credit enhancement consists of overcollateralization (“O/C”), excess spread, a reserve fund funded at closing, a prefunding account and subordination (except for the Class C Notes).
KBRA analyzed the transaction using the Global Consumer Loan ABS Rating Methodology published on November 28, 2017. KBRA’s consumer loan methodology incorporates an analysis of: (1) the underlying collateral pool, (2) the originator’s historical static pool data, segmented by characteristics including credit quality and product type, (3) the proposed capital structure for the transaction, (4) KBRA’s operational assessment of the originator and servicer and (5) the legal structure, transaction documents, and legal opinions. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.
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Preliminary Ratings Assigned: Foundation Finance Trust 2019-1 |
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| Class | Preliminary Rating |
Expected Initial Class |
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| A | AA (sf) | $272,059,000 | ||||||
| B | A- (sf) | $31,078,000 | ||||||
| C | BBB- (sf) | $27,170,000 | ||||||
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
