KBRA Assigns Preliminary Ratings to AFG ABS I, LLC

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to five classes of notes issued by AFG ABS I, LLC (AFG 2023-1), an equipment ABS transaction.

AFG 2023-1 represents the first equipment ABS transaction to be sponsored by Alliance Funding Group (AFG or the Company). AFG is a small and medium ticket equipment finance company founded in 1998 and headquartered in Tustin, California. AFG employs a vendor model generating originations through relationships with original equipment manufacturers, distributors, and resellers. The Company employed an originate to sell strategy through most of its history but began retaining originations in 2018.

AFG 2023-1 is backed by a pool of equipment loans and leases (Equipment Contracts). The statistical discounted pool balance (Statistical Pool) totals $115.2 million and represents the projected cash flows of the Equipment Contracts discounted at a rate of 8.50%. As of the initial cutoff date (January 31, 2023), the discounted contract value will be at least $123.4 million and the initial pool characteristics are expected to be substantially similar to the Statistical Pool. The total collateral may increase by up to $31.3 million (27.20% of the Statistical Pool) through the addition of Equipment Contracts during the three-month prefunding period.

The Statistical Pool includes 1,421 contracts, with an average contract balance of $81,092. Obligor concentrations are low with 1,228 total obligors and the largest obligor representing less than 0.50%. The Statistical pool is diversified geographically with the largest state, California, representing approximately 15% and all other states at less than 10% each. The pool is concentrated somewhat in the transportation industry, at approximately 19%. The pool benefits from a weighted average FICO of 747 and weighted average obligor time in business of 17 years.

AFG 2023-1 will issue five classes of notes, including a short-term tranche. Credit enhancement is comprised of overcollateralization, a cash reserve, subordination benefiting senior classes and excess spread. The overcollateralization is subject to a target equal to 15.00% of the current pool balance and a floor equal to 0.50% of the initial pool balance, accounting for any prefunding that occurs. The reserve account is funded at 1.00% of the initial pool balance and is non-amortizing.

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Related Publications

• Equipment Lease and Loan Global ABS Methodology
• Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

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Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. 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. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.