Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Conn’s Receivables Funding 2019-B, LLC (“CONN 2019-B”). The transaction represents the eighth ABS securitization since 2015 for Conn Appliances, Inc. (“Conn’s” or the “Company”) collateralized by a pool of retail installment sales contracts and installment loans made to finance customer purchases of merchandise from one of Conn’s retail locations.
This is a $485.96 million ABS transaction and will include approximately $568.37 million of receivables at closing. The transaction has initial credit enhancement levels of 44.70% for the Class A Notes, 29.65% for the Class B Notes, and 15.00% for the Class C Notes. Credit enhancement consists of overcollateralization, excess spread, a reserve account funded at closing, and, in the case of the Class A Notes and Class B Notes, subordination of the junior Notes.
Conn Appliances, Inc., a Texas corporation, is the sole direct subsidiary of Conn’s Inc., a publicly traded Delaware corporation. Conn’s has approximately 4,475 employees and operates 131 retail locations in 14 different states as of July 2019. Conn Appliances’ operates through two segments, retail and credit, and provides customers the opportunity to purchase high-quality premium brand products across four primary categories: furniture and mattresses, appliances, electronics, and home office goods.
Conn’s targets under-banked, subprime consumers that typically have credit scores between 550 and 650 and have limited access to credit. Their core customer demographic typically earns between $25,000 and $60,000 in annual income, lives in densely populated neighborhoods, and usually shops to replace older household goods with newer items. The Company focuses on a high level of customer service driven by a trained and motivated staff, quick delivery and installation, and product repair or replacement services. By combining this high level of customer service with unique retail and credit offerings, Conn’s strategy is to drive repeat transactions.
KBRA analyzed the transaction using the Global Consumer Loan ABS Rating Methodology published on November 28, 2017 and the Global Structured Finance Counterparty Methodology published on August 8, 2018. KBRA’s consumer loan methodology incorporates an analysis of: (1) the underlying collateral pool, (2) the originator’s historical static pool data, segmented by characteristics including credit quality and product type, (3) the proposed capital structure for the transaction, (4) KBRA’s operational assessment of the originator and servicer and (5) the legal structure, transaction documents, and legal opinions.
In applying the methodology, KBRA analyzed Conn’s static pool data and the underlying collateral pool. KBRA also conducted an on-site operational review of Conn’s at its servicing center in Beaumont, TX. In addition, KBRA stressed the capital structure based on its stress case cash flow assumptions. KBRA will review the operative agreements and legal opinions for the transaction prior to closing.
Preliminary Ratings Assigned: Conn’s Receivables Funding 2019-A, LLC
Class | Preliminary Rating | Expected Initial Class Principal |
A | BBB (sf) | $317,150,000 |
B | BB (sf) | $85,540,000 |
C | B (sf) | $83,270,000 |
To access ratings, reports and disclosures, click here.
Related Publication: (available at www.kbra.com)
CONNECT WITH KBRA
About KBRA and KBRA Europe
KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. 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) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
View source version on businesswire.com: https://www.businesswire.com/news/home/20191114005634/en/
Contacts:
Melvin Zhou, CFA, Director
(646) 731-2412
mzhou@kbra.com
