KBRA Assigns Preliminary Ratings to AFG ABS II, LLC
13 Nov 2026 | New York
KBRA assigns preliminary ratings to six classes of notes issued by AFG ABS II, LLC (AFG 2026-1), an equipment ABS transaction.
AFG 2026-1 represents the second equipment ABS transaction to be sponsored by Alliance Funding Group (AFG or the Company). AFG is a small and medium ticket equipment finance company founded in 1998 and headquartered in Tustin, California. AFG employs a vendor model generating originations through relationships with original equipment manufacturers, distributors, and resellers. The Company employed an originate to sell strategy through most of its history but began retaining originations in 2018.
AFG 2026-1 is backed by a pool of equipment loans and leases (Equipment Contracts). The statistical discounted pool balance (Statistical Pool) totals $193.3 million and represents the projected cash flows of the Equipment Contracts discounted at a rate of 8.00%. As of the initial cutoff date (October 31, 2026), the initial pool balance is projected to be approximately $199.1 million and the initial pool characteristics are expected to be substantially similar to the Statistical Pool. The total collateral may increase by up to $45.0 million (23.28% of the Statistical Pool) through the addition of Equipment Contracts during the three-month prefunding period.
The Statistical Pool includes 1,652 contracts, with an average contract balance of $116,997. Obligor concentrations are low with 1,387 total obligors and the largest obligor representing approximately 1.84%. The Statistical Pool is diversified geographically with the largest state, California, representing approximately 13.72%, followed by Texas at 12.99%, and all other states representing less than 7% each. The pool is concentrated somewhat in the general construction and specialty trades industry, at approximately 16.36%. The pool benefits from a weighted average FICO of 750 and weighted average obligor time in business of 13.3 years.
AFG 2026-1 will issue six classes of notes, including a short-term tranche. Credit enhancement is comprised of overcollateralization, a cash reserve, subordination benefiting senior classes and excess spread. The overcollateralization is initially approximately 10.50% and is subject to a target equal to 17.50% of the current pool balance and a floor equal to 0.50% of the initial pool balance, accounting for any prefunding that occurs. The reserve account is funded at 1.00% of the initial pool balance and is non-amortizing.
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