KBRA Places Ratings on BHG Securitization Trust 2022-C and BHG Securitization Trust 2023-A on Watch Downgrade
5 Jun 2024 | New York
KBRA places the ratings of the Class C, Class D and Class E notes of BHG Securitization Trust 2022-C and BHG Securitization Trust 2023-A on Watch Downgrade due to deteriorating credit performance which resulted in lower loss coverage than was available at closing. Within 90 days, KBRA will further review the transactions and resolve or update the Watch Placement status. To date, the securities have received timely interest payments.
The table below displays the current capital structures and Watch Placements undertaken in this review.
As of the May 2024 distribution date (April 2024 collection period), the cumulative net loss (“CNL”) for BHG 2022-C and BHG 2023-A are 9.70% and 4.42% respectively, which are above KBRA’s base case CNL assumptions of 4.10% and 2.69% at the comparable months of seasoning, respectively. Based upon performance to date, KBRA projects losses to be 19.50% and 16.00% for BHG 2022-C and BHG 2023-A respectively; an increase from both the levels projected at closing and from the last review for each transaction.
Both BHG 2022-C and BHG 2023-A include a cumulative net default (“CND") trigger based on a schedule, which if breached will cause the transaction to enter full turbo amortization where all available funds remaining after replenishing the reserve account will be applied to the principal distribution account. BHG 2022-C has been in breach of its CND trigger since the September 2023 distribution date and the CNL of 9.70% is above the trigger of 7.00% at the comparable month of seasoning. BHG 2023-A has not been in breach of the CND trigger as of the May 2024 distribution date and the CNL of 4.42% is below the trigger of 4.50% at comparable month of seasoning. For both deals, if the CND trigger is cured, the O/C target will be the greater of (i) the current O/C level or (ii) the 1.00% of the initial pool balance floor amount will be the new O/C target. These are depicted in the charts below.
The current 30+ day delinquency levels for BHG 2022-C and BHG 2023-A are 4.16% and 3.30%, respectively and are depicted in the chart below.
The current overcollateralization (“O/C”) for BHG 2022-C and BHG 2023-A are 11.66% and 11.51%, respectively. The O/C for BHG 2022-C is below its target O/C of 12.60% and has recently trended down after slowly building since closing. The O/C for BHG 2023-A has been at its target level since closing.
For additional information regarding a specific transaction, see the list below to access ratings, reports, and disclosures: