SEB Funding is preparing to sell $737.8 million in asset-backed securities to investors, in a whole business securitization of revenues from several fitness brands under global health and wellness franchisor Purpose Brands,
Operating in all 50 states and in more than 40 countries and territories, the Purpose Brands umbrella includes Anytime Fitness, Orangetheory Fitness, Waxing the City waxing studios, and Bar Method, low-impact studio fitness, according to Kroll Bond Rating Agency.
The sale of the series 2026-1 notes is slated to close on March 13, and is the third securitization from a master trust that first came to market in 2021, KBRA said.
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Barclays Capital leads the group of joint structuring advisors and joint bookrunners that includes Morgan Stanley, UBS Securities, Goldman Sachs and Robert W. Baird & Co.
The deal structure includes excess spread and an interest reserve account, which help confer credit enhancement to the notes, KBRA said. Also, an interest reserve account covers one quarter of the class A notes’ interest payments, the rating agency said.
Additional structural features includes a cash flow trapping provision, which specifies that if on any quarterly payment date, the principal and interest debt service coverage ratio falls between 1.50x and 1.75x, then SEB Funding will deposit 50.0% of all the excess cash flows into the cash trap reserve account.
If the DSCR is less than 1.50x, then all excess cash flows will be deposited into the cash trap reserve account, KBRA said.
The existing and future finance agreements, plus other revenue like royalties, fees and rebate revenue will be issued through two tranches of class A notes, While KBRA assigns BBB ratings to the 2026-1 notes, it will affirm ratings on the series 2024-1, classes A1 VFN and A2, and withdraw outstanding ratings on the series 2021-1 notes, the rating agency said.
While assigning BBB to the A1-R and A2 notes, KBRA will affirm ratings on the outstanding notes from SEB Funding 2024-1, classes A1-VFN and A2. The notes have an anticipated repayment date of January 2031, with a final maturity date of January 2056.
KBRA says SEB Funding’s leverage level, about 5.3x, is in line with the leverage seen on the 2024-1 series as of its closing date.
