Octane Receivables Trust to Offer $ 305 Million in Powersports Equipment


Octane Lending, a powersports equipment finance company that hopes to see its first profitable year in 2021, is preparing to price $ 305 million in asset-backed securities through Octane Receivables Trust 2021-1.

Founded in 2014 with venture capital funding, Octane Lending is a full spectrum lender that offers point-of-sale retail contracts and installment loans through powersports and electrical equipment dealers, according to the Kroll Bond rating agency. Customers use the funds to purchase all-terrain vehicles, cruisers, all-terrain motorcycles, sport motorcycles, personal watercraft and other vehicles, including golf carts, lawn mowers and other assets. motorsports, according to S&P Global Ratings.

With a New York-based risk department, the company began using the asset-backed securities market in 2019, and OCTL 2021-1 will be the issuer’s third trade, according to KBRA.

Roadrunner Financial, the subsidiary of Octane, is at the origin of the loans guaranteeing the ABS pool. Although the company has a short operational history, Octane’s management team has extensive experience in the automotive and powersports finance industry, and has worked at companies such as Capital One and GE Capital. Consumer, explains KBRA.

While growing organically, generating more loans, Octane has already provided loans of progressively higher quality than when it started. S&P reports that Octane began lending in the prime segment in the second quarter of 2017. In the fourth quarter of 2020, prime lending represented 60% of Octane Lending originations, according to S&P. Octane’s typical borrower profile is that of a homeowner with a weighted average income of $ 84,443 and a weighted average FICO score of 691.

Among its debtors, the three main lines of business are construction, manufacturing and healthcare, sectors that have not been heavily affected by the COVID-19 lockdowns.

In the 2021-1 pool, the numbers suggest better quality borrowers. The non-zero weighted average FICO score in the pool is 700. The average outstanding loan balance is $ 12,551 and the average monthly payment is $ 283.

Credit Suisse is the structuring leader of the transaction. Octane Receivables benefits from an initial credit enhancement of 16.8%, 8.75% and 1.0% on classes A, B and C, respectively. The excess margin, over-collateralization, subordination and a funded reserve account at the close provide additional credit enhancement, according to KBRA.

KBRA and S&P both assigned preliminary ratings of “AA” to the senior category of $ 256.6 million in notes; “A” to Class B subordinate notes of $ 24.7; and “BBB” to class C tickets.

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