Kroll Bond Rating Agency assigned preliminary ratings to four classes of notes issued by Blue Bridge Funding 2023-1 LLC (Blue Bridge 2023-1), Blue Bridge Financial’s first equipment ABS transaction.
Blue Bridge is an independent finance company providing small and medium-sized businesses with secured loans and leases for revenue-producing, essential-use equipment. Founded in 2009, Blue Bridge originally employed an originate to sell strategy. Buttonwood Capital Management made a majority investment in the company in 2014. Under new management, Blue Bridge moved to an originate to hold strategy and has originated more than $700 million and has portfolio net investment outstanding of $239.16 million as of Q3/23. Blue Bridge originates through two channels: referrals from brokers and other independent sales organizations (broker/ISO) and, more recently, directly to end users and vendors (vendor/direct). The company’s vendor/direct originations began Q3/21 but the majority of its originations continue to flow from the broker/ISO channel.
The discounted pool balance for the ABS transactions represents the discounted value of the projected cash flows of the contracts included in the collateral pool using a discount rate based on the interest rate on the notes plus fees and other amounts. As of Oct. 31, based on a discount rate of 9.25%, the discounted pool balance is $136.92 million (statistical pool). As of the initial cutoff date (Nov. 30), the discounted pool balance will be at least $133.76 million.
Blue Bridge 2023-1 will issue four classes of notes. Credit enhancement includes excess spread, a reserve account, overcollateralization and subordination for senior classes. The overcollateralization is subject to a target equal to 12.5% of the current pool balance and a floor equal to 0.5% of the initial pool balance. The reserve account is funded at 1% of the initial pool balance and is non-amortizing.
