KBRA Assigns Preliminary Ratings to Balboa Capital’s Seventh ABS

Kroll Bond Rating Agency assigned preliminary ratings to six classes of BCC Funding XVII LLC, Series 2020-1, an equipment loan and lease securitization. BCC Funding XVII LLC will issue six classes of notes, including a short-term class A-1 tranche. The transaction represents the seventh equipment asset-backed securities transaction sponsored by Balboa Capital, following issuances in 2007 (which benefited from bond insurance), 2014, 2015, 2016, 2018 and 2019.

Balboa Capital, founded in 1988 and headquartered in Costa Mesa, CA, is an independent equipment finance company that originates loans and leases for diversified types of equipment to small and medium businesses.

The transaction’s credit enhancement consists of overcollateralization, a cash reserve, subordination benefiting senior classes and excess spread. The overcollateralization is subject to a target equal to 9.5% of the current pool balance and a floor equal to 2% of the initial pool balance. The reserve account is funded at 1.5% of the initial pool balance and is non-amortizing.

As of Sept. 30, 2020, the pool of equipment contracts backing the transaction has a discounted pool balance of $170.66 million based on a 4.45% discount rate. During the three months following closing, funds in the prefunding account may be used to purchase up to approximately $41 million in discounted contract balance of new receivables, subject to eligibility criteria and concentration limits.

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