MOODY'S RATES ACLC BUSINESS LOAN ABS Aaa, Aa2, and A2
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 1999-1 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 ACFI 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 1999-1
$64,000,000 6.516% Class A-1 Notes, rated Aaa.
$19,000,000 6.94% Class A-2-Notes, rated Aaa.
$100,347,000 7.385% Class A-3 Notes, rated Aaa.
$17,672,000 7.71% Class B Notes, rated Aa2.
$17,672,000 8.095% Class C Notes, rated A2.
The notes are secured by a pool of loans that ACFI made to obligors engaged in the operation of restaurants (35.3%), convenience stores (31.3%), and a variety of other businesses. ACFI sold the loans to a special purpose corporation for subsequent transfer to the issuer. During the initial lockout period, all principal payments will be applied to the Class A Notes and allocated sequentially between the Class A-1, A-2, and A-3 Notes. The lockout period will end on the earlier of July 2002 or the date on which the Class A notes are reduced to 70% of the total offered notes. Following the lockout period, the principal will be distributed on a pro-rata basis between the Class A, Class B, and Class C Notes.
Subordination, Cross Guarantees, Reserve Account, and Excess Spread
Holders of the notes are protected against credit losses by the subordination of more junior notes and the certificates, cross guarantees from the obligors on the underlying loans, a spread account and excess spread. Initial subordination equals 17% for Class A, 8% for Class B and 1.0% for Class C. The subordinated certificates are not entitled to receive principal distributions until the notes are reduced to zero. As a result, the credit enhancement supporting the rated notes should increase as the pool amortizes.
The cross guarantees average 10.081% and range from 5.0% to 11.25%. At closing $1.0 million was deposited into a spread account. The initial balance is required to be maintained until July 2004. At that time the spread account requirement will be reduced to $500,000. The excess spread derived from the pool's weighted average coupon in excess of 9% is a significant source of loss protection as well.
Approximately 17% Prefunded
At closing, 187 loans with an aggregate principal balance of approximating $183.9 million were contributed to the trust. An additional $36.6 million (16.75% of the initial note and certificate amount) was deposited into a pre-funding account for the purchase of subsequent loans prior to August 27, 1999. 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 44 to 240 months. More than 83%, however, have remaining terms in excess of 10 years and nearly 68% are greater than 15 years.
The loans are collateralized by fee simple mortgages (70.55% of the initial pool balance), leasehold mortgages (25.44%), equipment (3.79%), and ground lease and second lien mortgages (0.23%). The pool should benefit from the relatively high concentration of fee simple mortgages because loans secured by real estate are expected to experience higher recoveries in the event of a default. The loans have a weighted average fixed charge coverage ratios of approximately 1.72 times. Borrower concentration is significant as the ten largest borrowers comprise 64% of the initial pool and the five largest 43%.
ACFI as Servicer
ACFI is a Nevada corporation wholly owned by AMRESCO, Inc. (Caa3). 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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