A specialty finance company that buys property tax liens from government authorities is preparing to tap the asset-backed securities market for the first time and raise $68.3 million from investors.
A team of 13 operates Chicago-based PVOne MREC Manager, which has funded more than $230 million in tax liens since it was founded in 2014, according to a pre-sale report from Kroll Bond Rating Agency. The ABS trust, PVOne 2023-1, will issue notes through two tranches of notes both of which have a legal final maturity date of July 2035.
The team's collective years of experience, more than 70, counts as a credit positive, according to KBRA. PVOne 2023-1 features an account with a total of $2.5 million at closing that will purchase subsequent tax liens on properties related to tax liens in the initial pool.
Compared with other tax lien transactions, PVOne 2023-1 has a much smaller initial redemption value, and has one of the lowest numbers of liens, at 9,681. Its single-digit weighted average loan-to-value (LTV) ratio happens more frequently in the KBRA comparison group, and stands at 8.8%. It isn't the lowest, however. That would be the FIG 2019-1. Weighted average seasoning, at seven months, is the lowest, though.
Similar to other deals, residential properties, 62.1%, account for the highest concentration of loans. Commercial properties account for the next-highest concentration, at 22.4%, followed by single-digit concentrations for industrial, vacant land, agriculture and other, at 9.2%, 5.3%, 0.3% and 0.8%, respectively.
Three states account for a combined 72.9% of the collateral pool's redemptive value. Broken down individually Florida accounts for the largest percentage, with 36.2%, followed by New Jersey and Illinois, with 19.0% and 17.7%, respectively. After Illinois, New York comes in with 9.19%, and Alabama rounds out the top five with 4.12%.
Overcollateralization, a cash reserve account, a working capital account, amounts in the subsequent tax lien account, and excess spread, provide credit enhancement to the notes.
KBRA intends to assign ratings of 'AAA' to the $64.7 million, class A notes and 'A' to the $3.6 million, class B notes.
