MOODY'S ASSIGNS RATINGS TO 5 CLASSES OF ACLC BUSINESS LOAN RECEIVABLES TRUST 1998-2
Moody's Investors Service has assigned Aaa ratings to the Class A, an Aa2 rating to the Class B, and an A2 rating to the Class C notes issued by ACLC Business Loan Receivables Trust 1998-2 in a securitization of loans originated by AMRESCO Commercial Finance, Inc.(ACFI). Moody's said the ratings are based on the quality of the underlying loans, available credit support and the experience of AMRESCO Commercial Finance, Inc (ACFI), formerly AMRESCO Commercial Lending Corporation, as servicer. The subordinated certificates and the interest-only notes were not rated by Moody's.
The complete rating actions are as follows:
Issuer: ACLC Business Loan Receivables Trust 1998-2
$51,000,000 5.900% Class A-1 Notes, rated Aaa.
$10,000,000 6.326% Class A-2-Notes, rated Aaa.
$62,798,000 6.686% Class A-3 Notes, rated Aaa.
$13,154,000 6.850% Class B Notes, rated Aa2.
$16,248,000 7.390% Class C Notes, rated A2.
$1,547,000 8.00% Certificates, not rated.
Interest Only Class I Notes, not rated.
The notes are secured by a pool of loans that ACFI made to obligors engaged in the operation of restaurants (55%), truck stops (12%), hotels (8%), distribution of transport refrigeration equipment (6%), health clubs (4%) and other businesses. ACFI sold the loans to a special purpose corporation for subsequent transfer to the issuer. Principal payments are fully allocated to the Class A notes in sequential order during a defined lockout period. The lockout ends the earlier of February 2002 or the date on which the Class A notes represent 70% of the total offered notes as compared to an 80% initially. Subsequent to the lockout, the principal will be distributed pro-rata with the Class A portion allocated sequentially. The certificates are not entitled to receive principal distributions until the notes are reduced to zero. Subordinated certificates and interest-only notes will be retained by the seller. Holders of the notes are protected against credit losses by subordination, cross guarantees from the obligors on the underlying loans, a spread account and excess spread. Subordination equals 20% for Class A, 11.5% for Class B and 1.0% for Class C. The cross guarantees average 11% and range from 5.0% to 21.4%. At closing $1.0 million was deposited into a spread account which amount is required to be maintained until February 2004. At that time the spread account requirement will be reduced to $500,000. The excess spread derived from the 9.0% average annual percentage rate on the loans less interest payable on the notes and transaction fees is a significant source of loss protection as well.
At closing, 87 loans with an aggregate principal balance of approximating $128.0 million were contributed to the trust. An additional $26.7 million (17%) was deposited into a pre-funding account to accommodate purchase of subsequent loans prior to March 31, 1999 when the funding period ends. The subsequent loans are subject to certain selection criteria designed to assure similar credit quality as the initial loans. Each of the initial loans is fully amortizing and has a remaining term from 13 to 240 months. More than 84%, however, have remaining terms in excess of 10 years and 56% are greater than 15 years. The weighted average fixed charge coverage ratio is approximately 1.79 times. Collateral for the loans which consists principally of real estate (63%) provides for a weighted average loan-to-value slightly below 70%. Borrower concentration is significant as the ten largest borrowers comprise 71% of the initial pool and the five largest 46%. There is also considerable geographic concentration with 29% of the pool balance related to obligors in Texas, 10% in Nevada, 7% in Ohio, and 6% each in Virginia and Illinois.
AMRESCO Commercial Finance Inc. Lending Corp. (ACFI) is a Nevada corporation wholly owned by AMRESCO, Inc. ACFI has been originating, servicing, and securitizing fixed and floating rate loans to franchise and non-franchise businesses on a nationwide basis since 1993. ACLC Funding Corp. is a Delaware special purpose company and a subsidiary of ACFI.
The notes were sold in a privately negotiated transaction without registration under the Securities Act of 1933 (the Act) under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A.
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