KBRA assigned preliminary ratings to five classes of debt issued by Monroe Capital ABS Funding II (MCAF II), a securitization backed by a portfolio of recurring revenue and middle market corporate loans.
MCAF II is an approximate $378.4 million securitization managed by Monroe Capital Management Advisors, an affiliate of Monroe Capital. The securitization consists of $92.0 million Class A-L floating rate loans, $74.5 million Class A-1 fixed rate notes, $60.5 million Class B fixed rate notes, $28.4 million Class C fixed rate notes, $24.6 million Class D fixed rate notes and $98.4 million of subordinated notes, which expect to receive payments from a portfolio of recurring revenue loans (RRLs) and middle market loans (MMLs). The reinvestment period is approximately two years from the closing date. The ratings reflect initial credit enhancement levels, excess spread and structural features.
The collateral in MCAF II may contain up to 75% RRLs. Monroe’s recurring revenue lending strategy focuses on first-lien senior secured loans to business-to-business software and technology companies with a minimum level of recurring revenue and low loan-to-value ratios. Despite the low level of earnings, the obligors in the portfolio usually have strong liquidity profiles and loan covenants. The portfolio presented to KBRA contains exposures to 76 obligors and has an overall K-WARF of 3575, which equates to a weighted average portfolio assessment between B- and CCC+.
Monroe is an affiliate of Monroe Capital, established in 2004, with $14.1 billion of committed and managed capital under management as of Oct. 2022. Monroe currently manages $4.4 billion in middle market loan CLOs across approximately 13 outstanding transactions.
KBRA’s ratings on the Class A-L Loans and Class A-1, Class B, and Class C Notes considers timely payment of interest and ultimate payment of principal by the applicable stated maturity date. The class D Notes reflect ultimate payment of interest and ultimate payment of principal by the stated maturity date.
