Kroll Bond Rating Agency assigned preliminary ratings to three classes of notes issued by CP EF Asset Securitization I, Series 2022-1 (CPEF 2022-1), an equipment asset-backed securitization transaction.

CPEF 2022-1 represents Channel Partners Capital’s first equipment ABS following the company’s inaugural ABS transaction, CPC Asset Securitization I Series 2021-1 (CPC 2021-1), in December 2021. CPC 2021-1 was collateralized by small business loans and business cash advances.

Founded in 2009, Channel Partners Capital focused on providing point-of-sale working capital finance to small businesses during the first 10 years of its history. This strategy resulted in Channel Partners Capital working with and developing relationships with equipment finance partners.

Beginning in 2020, Channel Partners Capital launched its own equipment finance offering. Originations are sourced through Channel Partners Capital’s network of equipment finance company partners, which refer business to Channel Partners Capital for both working capital finance as well as for equipment finance. Channel Partners Capital funds originations that its partners are unable to finance, and its current portfolio consists mostly of originations in excess of risk-based portfolio concentration limits for a partner (for example, obligor or industry limits), originations that don’t fit a partner’s credit strategy and originations from brokers.

The discounted pool balance 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 May 31, 2022, based on a discount rate of 9.13%, the discounted pool balance is $147.6 million (statistical pool). The transaction also features a prefunding account of approximately $33.2 million that may be used to purchase additional contracts during the three-month period following the closing date.

CPEF 2022-1 will issue three classes of notes. Credit enhancements for the transaction include excess spread, a reserve account, overcollateralization and subordination for senior classes. The overcollateralization is subject to a target equal to 22.75% 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.