Kroll Bond Rating Agency assigned preliminary ratings to five classes of notes issued by Alliance Funding Group ABS I, (AFG 2023-1), an equipment ABS transaction. AFG 2023-1 represents the first equipment ABS transaction to be sponsored by Alliance Funding Group.
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, 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.