KBRA Comments on Amendment to Momnt Technologies Trust 2023-1
April 25 2024 - 5:44PM
Business Wire
On April 19, 2024, Momnt Technologies Trust 2023-1 (“MMNT
2023-1” or the “Trust”), a home improvement loan ABS transaction,
was amended to allow for the conveyance of approximately $8.09
million of additional collateral (“Additional Collateral”) into the
Trust.
Momnt Technologies Inc. (“Momnt” or the “Company”) was founded
in 2019 and is a financial technology company headquartered in
Atlanta, GA. The Momnt 2023-1 transaction initially closed on
December 22, 2023. The portfolio balance as of the Initial Cut-off
Date was expected to be approximately $150.9 million, consisting of
an aggregate principal balance of the initial receivable pool of
approximately $90.1 million plus an expected prefunding account
balance to be deposited on the closing date of approximately $60.8
million. The transaction had a 90-day prefunding period, that
expired on March 18, 2024.
The amendment was to address a collateral shortfall that was
first discovered after the first Payment Date in February 2024 and
caused by the purchase of collateral during the prefunding period
at an amount exceeding the specified amount required in the
transaction documents and an overestimation of the collateral at
closing. Regarding the former, on the closing date approximately
$60.8 million was deposited into the prefunding account, which was
used to purchase additional collateral during the prefunding
period. According to the Indenture, loans acquired by the Trust
during the prefunding period were required to be purchased at the
principal balance of such loan as of the applicable cutoff date.
However, the purchase price incorrectly included accrued finance
charges and fees into the principal balance.
The application of cash and loan acquisitions were the
responsibility of the Administrator, Saluda Grade Asset Management,
LLC. The Sponsor added the Additional Collateral on April 19, 2024
to address the collateral shortfall, and bring the credit
enhancement to the approximate level that would have been achieved
if the prefunding proceeds had been appropriately utilized to
acquire collateral at par and the open-to-buy shortfall had been
discovered at closing. The below table shows the credit enhancement
of each rated class of notes at closing, before the conveyance of
Additional Collateral (as of the March 2024 Distribution Date for
the February 2024 Collection Period), and on a proforma basis after
the conveyance of Additional Collateral (as of the March 2024
Distribution Date for the February 2024 Collection Period).
Approximately $90.1 million of collateral, as of the closing
date, was outside the purchase window, implying that borrowers no
longer had the ability to make further draws (the “open-to-buy”
limit). A borrower’s open-to-buy limit is a closed-ended credit
limit Momnt assigns a borrower, which the borrower can use to make
purchases during a purchase window (typically the earlier of five
months or whenever the borrower utilizes their entire open-to-buy
limit). However, approximately $4.6 million of the $90.1 million
was never drawn on by borrowers during their purchase window. This
shortfall was not identified by the Sponsor or Momnt at closing.
Therefore, the $4.6 million never materialized as collateral and
the portfolio balance as of the Initial Cut-off Date was
approximately $4.6 million less than expected.
KBRA has been in dialogue with the Sponsor and Momnt, which
indicated that the administrative processes that led to the issues
herein were due to misinterpretation of purchase price for each
subsequent receivable acquired by the Trust during the prefunding
period, as well as an oversight regarding the final principal
balance at closing. Given the transaction is outside of the
prefunding period and all collateral, including Additional
Collateral, is outside the purchase window, KBRA believes this
issue has been remediated for the Momnt 2023-1 transaction going
forward.
A review of the Additional Collateral and that of the remaining
pool indicated the credit quality of the collateral is generally
commensurate with that of the collateral on the Closing Date.
Furthermore, the credit enhancement levels of each class have
increased since closing. KBRA is not effectuating rating actions at
this time, and will continue to monitor the situation in
conjunction with its ongoing surveillance effort. Should further
administrative issues arise it may result in Watch Placements or
rating actions.
Related Publications
- Momnt Technologies Trust 2023-1 New Issue Report
About KBRA
KBRA is a full-service credit rating agency registered in the
U.S., the EU, and the UK, and is designated to provide structured
finance ratings in Canada. KBRA’s ratings can be used by investors
for regulatory capital purposes in multiple jurisdictions.
Doc ID: 1004090
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240425705354/en/
Maxim Berger, Director +1 646-731-1260 maxim.berger@kbra.com
Juhi Paranjape, Senior Analyst +1 646-731-1340
juhi.paranjape@kbra.com
Eric Neglia, Head of Commercial and Consumer ABS +1 646-731-2456
eric.neglia@kbra.com
Business Development Contact
Arielle Smelkinson, Senior Director +1 646-731-2369
arielle.smelkinson@kbra.com