KBRA assigns preliminary ratings to four classes of notes issued by Blue Bridge Funding 2023-1 LLC (Blue Bridge 2023-1) an equipment ABS transaction.
Blue Bridge 2023-1 represents Blue Bridge Financial, Inc.’s (Blue Bridge or the Company) first 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 over $700 million and has portfolio net investment outstanding of $239.16 million as of third quarter 2023. 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). Vendor/Direct originations began in third quarter 2021 and the majority of originations continue to flow from the Broker/ISO channel.
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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 October 31, 2023, based on a discount rate of 9.25%, the discounted pool balance is $136.92 million (Statistical Pool). As of the initial cutoff date (November 30, 2023) 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 12.50% of the current pool balance and a floor equal to 0.50% of the initial pool balance. The reserve account is funded at 1.00% of the initial pool balance and is non-amortizing.
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