NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Bankers Healthcare Group Securitization Trust 2020-A (“BHG 2020-A”), an asset-backed securitization collateralized by a pool of small business loans (“Commercial Loans”) and unsecured consumer loans (“Consumer Loans”).
The impact of COVID-19 has resulted in an economic slowdown and high unemployment, which can adversely impact the performance of small business loans and unsecured consumer loans, including those supporting the subject transaction. Owing to this risk, KBRA increased its base case default assumptions for the subject pool in a manner that was consistent with the recent portfolio reviews of the sectors detailed in the following reports: U.S. Small Business ABS Watch Downgrade Surveillance Report, Updated U.S. Small Business ABS Watch Downgrade Surveillance Report and U.S. Unsecured Consumer ABS Securities on Watch Report.
BHG 2020-A represents the first term ABS securitization for Bankers Healthcare Group, LLC (“BHG” or the “Company”). BHG 2020-A will issue three classes of notes totaling approximately $159.61 million. The ratings reflect initial credit enhancement levels of 36.65% for the Class A Notes, 23.90% for the Class B Notes, and 10.50% for the Class C Notes.
The loans in the transaction were originated by BHG or Pinnacle Bank (“Pinnacle Bank” or the “Originating Bank”) which is a subsidiary of Pinnacle Financial Partners, Inc. (“PNFP”). All Consumer Loans and certain Commercial Loans are originated by Pinnacle Bank pursuant to the respective originator’s underwriting criteria. Commercial Loans not originated by Pinnacle Bank are originated by BHG. Neither BHG nor Pinnacle Bank originates any Commercial Loans above a 23.99% interest rate. Pinnacle Bank does not originate any Consumer Loans above a 23.99% APR. As of the June 28, 2020 cutoff date (“cutoff date”) for BHG 2020-A, the percentage of loans originated by BHG and Pinnacle Bank is 72.40% and 27.60%, respectively. The cutoff date pool consists of 80.01% Commercial Loans and 19.99% Consumer Loans.
BHG was founded in 2001 and provides Commercial Loans and Consumer Loans primarily to prime, high income and highly skilled licensed medical professionals including physicians/surgeons, dentists, registered nurses, and pharmacists. BHG is led by co-founder, Chairman and Chief Executive Officer Albert Crawford. In 2015 and 2016, PNFP, a holding company headquartered in Tennessee, acquired ownership interests in BHG and, with its subsidiary Pinnacle Bank, currently owns 49% of the Company. With corporate headquarters in Davie, Florida, and financial headquarters in Syracuse, New York, BHG has provided more than $6.2 billion in funding to over 57,000 borrowers since inception.
KBRA applied its Global General Rating Methodology for Asset-Backed Securities, Global Consumer Loan ABS Rating Methodology and Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool and the proposed capital structure. KBRA also conducted an operational review of BHG, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.
- General Global Rating Methodology for Asset-Backed Securities
- Global Consumer Loan ABS Rating Methodology
Global Structured Finance Counterparty Methodology
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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