8-K: NewtekOne Closes Record $295M ALP Loan Securitization

NewtekOne, Inc. announced its 17th and largest securitization, raising $295 million backed by $342 million in Alternative Loan Program loans.

Summary

• NewtekOne, Inc. completed its 17th and largest rated securitization, NALP Business Loan Trust 2026-1, raising $295 million.
• The securitization is backed by $341,776,148 of collateral, including $284,376,148 in originated ALP loans and a $57,400,000 prefunding account.
• The transaction was roughly ten times oversubscribed, with 32 institutions purchasing the notes.
• The Class A Notes, Class B Notes, and Class C Note were sold for $251,880,000, $35,880,000, and $6,840,000 respectively.
• The Class A Notes received a Morningstar DBRS rating of A (low) (sf) with a 5.796% yield, Class B Notes BBB (sf) with a 7.296% yield, and Class C Note BB (sf) with a 10.146% yield.
• The weighted average yield of the Notes was 6.08%, with a weighted average spread of 243 basis points over the Treasury benchmark.
• The collateralizing ALP loan portfolio has a gross weighted average coupon of approximately 12.74%, netting to 11.74% after servicing fees.
• Since 2019, NewtekOne has originated approximately $850 million in ALP loans, experiencing only six defaults and one charge-off of $6 million.

Sentiment

Score: 9

Explanation: The filing reports a highly successful and oversubscribed securitization, the largest in the company's history, with favorable pricing and strong historical performance of the underlying assets. Management expresses strong confidence and positive future outlook for this financing strategy.

Positives

• Largest securitization to date for NewtekOne, demonstrating strong market confidence.
• Transaction was roughly ten times oversubscribed by 32 institutions, indicating high investor demand.
• All prior securitizations have maintained or been upgraded in their investment-grade ratings and have never been on credit watch.
• Improved weighted average spread of 243 basis points over the Treasury benchmark, down from 271 basis points in the prior year's ALP-backed securitization.
• Slightly higher advance rate of 86% compared to 85% in the 2025 ALP-backed securitization.
• Significant excess spread of almost 570 basis points to support note holders' yield, nearly identical to the 2025 ALP-backed securitization.
• Strong historical performance of ALP loans with only six defaults and one $6 million charge-off on approximately $850 million originated since 2019.
• Company's ALP loans are structured with longer amortization periods (10-25 years) and reasonable interest rates, contrasting favorably with competitors' short-term, high-yield offerings.

Risks

• Actual results may differ materially from forward-looking statements due to significant risks and uncertainties.
• Risks are detailed in the Company's filings with the Securities and Exchange Commission, specifically in the "Risk Factors" sections.
• The Notes were not registered under the Securities Act of 1933 and may only be offered or sold in the United States in accordance with Rule 144A, limiting their market.

Future Outlook

NewtekOne intends to continue issuing securitizations backed by ALP loans, viewing them as a crucial element of its business and financial solutions and financial performance. The company expects loss rates on ALP loans to remain materially lower than those in the SBA 7(a) program due to the healthier liquidity, larger business size, and stronger guarantors of its ALP borrowers.

Management Comments

• "We are extremely pleased to have completed a fourth securitization backed by ALP loans and are grateful to our investment bankers, Deutsche Bank Securities, Capital One Securities, and Santander, for their efforts."
• "We intend to continue to issue securitizations backed by ALP loans and continue to view ALP loans as an important element to the Company’s offering of business and financial solutions and our financial performance."
• "During our recent Investor Day held on January 8th, we discussed our ALP securitizations and demonstrated that these securitizations have had wide spreads between the yields on the ALP loans collateralizing the securitizations and the weighted-average coupons of the debt issued by securitization trusts; a majority of that excess spread is used to retire the securitization debt."
• "In 2026-1, there is almost 570 basis points of margin or excess spread to support the Note holders yield; the 2026-1s excess net spread is nearly identical to that of the 2025 ALP-backed securitization."
• "We continue to expect that loss rates on ALP loans should be materially lower than those experienced in the SBA 7(a) program given that our ALP borrowers typically have healthier liquidity, are substantially larger businesses, and have stronger guarantors."
• "We are proud of our track record and believe that we continue to demonstrate that we are a premier originator of business loans to independent business owners in all 50 states, using various forms of financings and deal structures to achieve our goals and those of our customers."
• "We are longer-term, patient providers of capital to independent business owners, which is in stark contrast to competitors' instant funding programs with short maturities and very high interest charges."
• "Becoming a technology-enabled financial holding company three years ago, owning a nationally chartered bank, has improved our ability to deliver our value proposition to clients while allowing us to diversify our funding sources, reduce our financing costs, and generate value for our investors."

Industry Context

This securitization highlights the continued strength and demand in the asset-backed securities market, particularly for diversified loan portfolios like NewtekOne's Alternative Loan Program (ALP) loans. The oversubscription and favorable pricing indicate robust investor appetite for well-structured credit products, even in a potentially volatile interest rate environment. NewtekOne's strategy of providing longer-term, patient capital to independent business owners through ALP loans positions it distinctly against competitors offering short-term, high-interest 'instant funding' solutions, potentially capturing a different segment of the small business lending market.

Comparison to Industry Standards

• NewtekOne's ALP loans offer longer-term amortization (10-25 years) and reasonable interest rates, contrasting with some competitors that charge 30-80% yields with short repayment schedules (6-24 months).
• The weighted average spread of 243 basis points over the Treasury benchmark for the 2026-1 securitization improved from 271 basis points for the 2025 ALP-backed securitization, indicating better pricing relative to market benchmarks.
• The historical loss rates on ALP loans (6 defaults, $6 million charge-off on $850 million originated since 2019) are expected to be materially lower than those experienced in the SBA 7(a) program, suggesting a potentially higher quality loan portfolio compared to government-backed small business loans.
• The securitized debt of prior ALP securitizations (NALP Business Loan Trust 2024-1 and 2025-1) was being retired at a faster pace than the underlying ALP loans, leading to growing book values (overcollateralization), which is a positive indicator of structural integrity compared to typical securitization performance.

Stakeholder Impact

• Shareholders: Positive impact due to successful financing, diversified funding sources, reduced financing costs, and potential for increased value generation. The company's ability to execute large, oversubscribed securitizations demonstrates financial strength and operational efficiency.
• Note Holders (Investors in the securitization): Positive impact due to investment-grade ratings, significant excess spread (570 basis points) supporting yields, and a track record of prior securitizations maintaining or upgrading ratings. The faster-than-expected retirement of prior securitized debt also suggests strong performance.
• Customers (Independent Business Owners): Positive impact as NewtekOne continues to provide longer-term, patient capital and a range of business solutions, contrasting with competitors' high-cost, short-term offerings. The securitization provides ongoing funding capacity for these loans.
• Employees: Positive impact from a growing and financially stable company, potentially leading to job security and growth opportunities.

Next Steps

• NewtekOne intends to continue to issue securitizations backed by ALP loans.
• The company plans to acquire additional ALP loans using the $57,400,000 prefunding account.
• NewtekOne will continue to grow its brand to reflect its value-creating, patient approach to independent business owners.

Key Dates

Recommendation

The successful closing of NewtekOne's largest and significantly oversubscribed securitization, coupled with improved pricing metrics and a strong track record of low defaults on its ALP loans, signals robust financial health and effective capital management. The company's strategic focus on patient, long-term capital for independent businesses differentiates it favorably from competitors. This event demonstrates strong investor confidence and provides substantial liquidity for future growth, making the stock an attractive 'strong buy' for investors seeking exposure to a well-managed financial services company with a proven securitization model.

Keywords

NewtekOne, ALP loans, securitization, asset-backed securities, debt offering, financial services, small business lending, alternative lending, NASDAQ: NEWT, Morningstar DBRS, private placement, Rule 144A