Cartiga returns for a third ABS deal, to raise $111.9 million

In its third trip to the securitization market to raise funds, Cartiga Asset Finance Trust is seeking to raise $111.9 million in asset-backed securities, a deal secured by litigation finance receivables.

Stifel, Nicolaus & Co. are initial note purchasers, while East West Markets is co-manager, according to a pre-sale report from Kroll Bond Rating Agency. The collateral pool is comprised of pre-settlement and post-settlement legal claim proceeds that claimants receive from specialty finance companies like Cartiga Consumer and Momentum, KBRA said. Cartiga Asset Management is sponsoring the deal.

In most legal proceedings where a financial sum is awarded, a defendant’s insurance company settles up. This works in the notes’ favor from a credit standpoint, KBRA said. There might be a small non-payment risk on behalf of the insurance company, or if the defendant is self-insured, but the pool has diverse payment sources, the receivables have a relatively fast turnover rate, and the insurance companies are financially strong, KBRA said.

The deal has a $10 million prefunding account, funded through the note issuance, that could be used to purchase additional eligible receivables during the three months after closing.
Cartiga will issue notes through three classes, according to KBRA, and three mechanisms provide credit enhancement: overcollateralization, subordination and a reserve account.

KBRA intends to assign ratings of ‘A’ to the class A notes; ‘BBB’ to the class B notes and ‘BB’ to the class C notes, which all have a final maturity date of March 15, 2035.