AN EVOLUTION IN PROCESS

Weekly Insights from Sol Berkoff
Principal at Charleston Capital, Inc.

Kabbage, the second largest alternative small businesses finance company, priced a securitization last week.  They achieved excellent execution – their all-in issuance spread declined from +325 on their 2017 transaction to +172 on this transaction.

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How widespread is the acceptance of small business finance securitizations?  The improvement in Kabbage’s spreads is one indicator. 
 
An additional indicator is that another alternative small businesses finance company, Rapid Advance, was able to price a deal in the stormy market of December 2018.
 
How difficult was that market?
 
Well – there was zero high yield bond issuance in December 2018.  The last time high yield was shut out for the whole month of December was in 2006.
 
That is not to say small business finance securitizations are anywhere near as liquid as high yield.  But, investor support for the asset class was strong enough for Rapid Advance to get a deal done in a rough market.  It was then strong enough, once the market settled down, to bring Kabbage’s pricing in significantly versus their previous transaction. 
 
At CCI, our secure funding ecosystem efficiently connects us to growing small business finance companies.  It provides us real time clarity on performance – giving us a unique advantage. There are a lot of small business finance companies out there that could be the next Kabbage.  Here at CCI, we are enabling an evolution in process.