Ratings On Newtek Small Business Loan Trust 2016-1 Affirmed
OVERVIEW
- Newtek Small Business Loan Trust 2016-1 is an ABS transaction collateralized primarily by a pool of unguaranteed interests in U.S. Small Business Administration Section 7(a) loans backed by commercial real estate and other collateral, such as equipment and receivables from various sources.
- We affirmed our ratings on the class A and B notes.
- Our rating action reflects the improved credit support for the notes because of the transaction's turbo principal payment structure.
NEW YORK (S&P Global Ratings) Nov. 20, 2019--S&P Global Ratings today affirmed its ratings on Newtek Small Business Loan Trust 2016-1's class A and B notes. The transaction has not breached any triggers. During a non-trigger period, the class A and B principal are paid pari passu on a pro rata basis until reduced to zero. Upon a trigger event, the notes are paid in sequential order such that the class A principal is first paid down to zero before any principal is paid to the class B noteholders. The affirmed ratings reflects the notes' improved credit support because of the transaction's turbo principal payment structure. According to the October 2019 distribution report, the transaction has paid down to a 46% note factor for both notes and a 63% pool factor. The class A and B balances are $19,920,425.05 and $4,479,721.56, respectively. The collateral balance is $44,217,339.17. As of the Oct. 25, 2019, distribution date, there were 294 loans in the pool. The portfolio had six loans totaling $2,185.163.40 that were classified as 90-119 days delinquent; three loans totaling $406,418.69 that were classified as 120-149 days delinquent; and 19 loans totaling $4,576,169.54 that were classified as 150+ days delinquent. We have observed that the 90+ day-delinquency bucket has steadily increased year-over-year and currently represents 16% of the current pool. We defaulted and applied a small recovery rate to the 90+ day-delinquent, liquidation, and workout loans in our cash flow analysis. Under our rating runs, the class B passed at the 'BBB+ (sf)' rating level and class A passed at a level higher than its affirmed rating; however, we considered the fact that the transaction has a relatively high level of delinquencies and we affirmed the class A at 'A(sf)'. We will continue to review whether, in our view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and we will take further rating actions as we deem necessary.
RELATED CRITERIA
- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019
- Criteria | Structured Finance | General: Methodology And Assumptions For U.S. Small Business Loan-Backed Securitizations, March 28, 2014
- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
RELATED RESEARCH
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- Newtek Small Business Loan Trust 2016-1, Nov. 1, 2016
In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; " Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; " Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, 2009. RATINGS AFFIRMED Newtek Small Business Loan Trust 2016-1 Class Rating A A (sf) B BBB+ (sf)
| Primary Credit Analyst: | Srabani C Chandra-Lal, New York (1) 212-438-5036; srabani.chandra-lal@spglobal.com |
| Secondary Contact: | Deborah L Newman, New York (1) 212-438-4451; deborah.newman@spglobal.com |
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