PRELIMINARY PURCHASE AGREEMENT
SkyLend Receivables Trust 2024-1 Consumer Receivables-Backed Notes
Deal Reference: HLC-ABS-2024-017
February 20, 2024
DRAFT — Subject to Revision and Completion
CUSIP Prefix: 87165Q (allocated, unused)
Status: Partially executed; execution version never finalized due to transaction termination on May 8, 2024.
TABLE OF CONTENTS
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PRELIMINARY PURCHASE AGREEMENT
This PRELIMINARY PURCHASE AGREEMENT (this "Agreement"), dated as of February 20, 2024, is entered into by and among:
(1) SKYLEND RECEIVABLES TRUST 2024-1, a Delaware statutory trust (EIN 93-4201855), formed on February 14, 2024, with its principal office at c/o Keymark Trust Company, N.A., 600 North King Street, Wilmington, Delaware 19801 (the "Issuer");
(2) SKYBRIDGE FINTECH LTD., a Delaware corporation (EIN 84-3291076), with its principal office at 1400 Market Street, Suite 1210, Wilmington, Delaware 19801 (the "Originator" or the "Sponsor" or "SBF");
(3) SKYLEND FUNDING LLC, a Delaware limited liability company (EIN 93-4187620), a single-member limited liability company with Skybridge Fintech Ltd. as its sole member, with its principal office at 1400 Market Street, Suite 1210, Wilmington, Delaware 19801 (the "Depositor"); and
(4) HALCYON SECURITIES LLC, a Delaware limited liability company and registered broker-dealer, with its principal office at 200 Vesey Street, 42nd Floor, New York, New York 10281 (the "Initial Purchaser").
The Issuer, the Originator, the Depositor, and the Initial Purchaser are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. The Issuer proposes to issue and sell asset-backed notes in an aggregate principal amount of Two Hundred Million Dollars ($200,000,000) (the "Notes"), consisting of (i) One Hundred Seventy Million Dollars ($170,000,000) aggregate principal amount of Class A asset-backed notes (the "Class A Notes") and (ii) Twenty-Two Million Dollars ($22,000,000) aggregate principal amount of Class B asset-backed notes (the "Class B Notes"), which Notes will be secured by a pool of unsecured consumer installment-loan receivables originated by the Originator through its proprietary SkyLend digital lending platform (collectively, the "Receivables");
B. The Depositor has been formed as a special-purpose entity for the sole purpose of acquiring Receivables from the Originator and transferring such Receivables to the Issuer pursuant to the Sale and Servicing Agreement (as defined herein), in accordance with the transaction structure contemplated by the Transaction Documents;
C. The Notes will be offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 144A promulgated thereunder ("Rule 144A"), and, with respect to sales outside the United States, in reliance on Regulation S promulgated under the Securities Act ("Regulation S");
D. The Initial Purchaser desires to purchase the Notes from the Issuer for resale to qualified institutional buyers (as defined in Rule 144A, "QIBs") under Rule 144A and to non-U.S. persons (as defined in Regulation S) in offshore transactions under Regulation S, in each case in accordance with the terms and conditions set forth herein;
E. The Issuer, the Originator, the Depositor, and the Initial Purchaser desire to set forth the terms and conditions upon which the Initial Purchaser will purchase the Notes from the Issuer;
F. Reference is made to the Preliminary Offering Memorandum dated April 5, 2024 (the "Preliminary OM"), which describes the Notes, the Receivables pool, the transaction structure, the parties to the transaction, credit enhancement, and related matters;
G. Keymark Trust Company, N.A. ("Keymark") serves as the Owner Trustee of the Issuer under the Trust Agreement (as defined herein); Atlantic Fiduciary Services, Inc. ("AFS") serves as the Indenture Trustee, Note Registrar, Paying Agent, and Custodian under the Indenture (as defined herein) and the Custodial Agreement (as defined herein); Clearview Loan Servicing, Inc. ("Clearview") serves as the third-party servicer and sub-servicer under the Sale and Servicing Agreement and the Master Servicing Agreement; and Broadleaf Analytics Group LLC ("Broadleaf") has been engaged by the Initial Purchaser to perform independent loan-level due diligence and re-underwriting of a representative sample of the Receivables pool;
H. Meridian Credit Ratings, Inc. ("Meridian") and Carrollton Ratings Group LLC ("Carrollton") have been engaged to assign credit ratings to the Notes, and the expected ratings for each class of Notes are set forth in the definitions of Class A Notes and Class B Notes herein; and
I. Calderwood & Harkness LLP ("C&H") serves as counsel to the Issuer and the Originator in connection with the transactions contemplated hereby, and Whitfield, Drummond & Paige LLP ("WDP") serves as counsel to the Initial Purchaser in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the meanings specified below. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Indenture or the Sale and Servicing Agreement, as applicable.
"Acceptance Fee" means the non-refundable acceptance fee of Fifteen Thousand Dollars ($15,000) payable to AFS in connection with its acceptance of its appointment as Indenture Trustee, Note Registrar, Paying Agent, and Custodian under the Indenture and the Custodial Agreement.
"Account Control Agreement" means the Account Control Agreement to be entered into among the Issuer, AFS, and Keymark, governing the control and disposition of funds in the trust accounts established in connection with the Indenture.
"Administration Agreement" means the Administration Agreement to be entered into between the Issuer and SBF, pursuant to which SBF will perform certain administrative functions on behalf of the Issuer in connection with the Notes and the Receivables pool.
"AFS" means Atlantic Fiduciary Services, Inc., a Delaware trust company, having its principal office at 2 Christiana Centre, Suite 1400, Wilmington, Delaware 19801, in its capacity as Indenture Trustee, Note Registrar, Paying Agent, and Custodian.
"Agreement" means this Preliminary Purchase Agreement, as the same may be amended, supplemented, or modified from time to time in accordance with the terms hereof.
"Broadleaf" means Broadleaf Analytics Group LLC, the independent loan-level due diligence provider engaged by the Initial Purchaser, whose engagement partner is Sanjay Rajan.
"Business Day" means any day other than (a) a Saturday, (b) a Sunday, or (c) a day on which banking institutions in New York, New York or Wilmington, Delaware are authorized or required by law, regulation, or executive order to be closed.
"Carrollton" means Carrollton Ratings Group LLC, the secondary rating agency engaged to assign credit ratings to the Notes. The expected ratings from Carrollton are AA+(sf) for the Class A Notes and A(sf) for the Class B Notes.
"Class A Notes" means the One Hundred Seventy Million Dollars ($170,000,000) aggregate principal amount of Class A asset-backed notes to be issued by the Issuer pursuant to the Indenture, representing approximately 85% of the total deal value. The Class A Notes have a target coupon range of 5.45% to 5.65% per annum, an expected weighted average life of 2.1 years, and expected credit ratings of Aaa(sf) from Meridian and AA+(sf) from Carrollton.
"Class B Notes" means the Twenty-Two Million Dollars ($22,000,000) aggregate principal amount of Class B asset-backed notes to be issued by the Issuer pursuant to the Indenture, representing approximately 11% of the total deal value. The Class B Notes have a target coupon range of 6.75% to 7.00% per annum, an expected weighted average life of 3.4 years, and expected credit ratings of A2(sf) from Meridian and A(sf) from Carrollton.
"Clearview" means Clearview Loan Servicing, Inc., the third-party servicer, having its principal office at 8800 Brecksville Road, Suite 300, Cleveland, Ohio 44141.
"Closing" means the consummation of the purchase and sale of the Notes pursuant to this Agreement.
"Closing Date" means the date on which the Notes are issued and delivered to the Initial Purchaser in exchange for payment of the Purchase Price, as specified by the Parties in accordance with the terms of this Agreement. As of the date of this Agreement, the Closing Date has not been determined. The Closing did not occur, and the transaction was terminated on May 8, 2024.
"Custodial Agreement" means the Custodial Agreement to be entered into among the Issuer, the Depositor, and AFS, pursuant to which AFS will serve as custodian of the loan files and electronic records relating to the Receivables.
"Cut-Off Date" means March 31, 2024.
"Depositor" means SkyLend Funding LLC, a Delaware limited liability company (EIN 93-4187620), a single-member limited liability company of which Skybridge Fintech Ltd. is the sole member.
"DTC" means The Depository Trust Company, a New York-chartered limited-purpose trust company that functions as the central securities depository for securities clearance and settlement.
"Eligibility Criteria" means the criteria for inclusion of Receivables in the Receivables Pool, as set forth in the Schedule of Eligibility Criteria attached to the Receivables Purchase Agreement and the Sale and Servicing Agreement, including, without limitation, the maximum single-obligor concentration limit, geographic concentration limits, loan-size parameters, loan-term parameters, borrower credit characteristics, and origination and documentation requirements.
"Excess Spread" means the amount, if any, by which the interest collected on the Receivables in any collection period exceeds the sum of (a) interest payable on the Notes, (b) the Servicing Fee, and (c) other fees and expenses of the Issuer. The Excess Spread is estimated at approximately 2.85% per annum based on the characteristics of the Receivables pool as of the date of this Agreement.
"Expense Reimbursement Cap" means the maximum aggregate amount of Three Hundred Eighty-Seven Thousand Five Hundred Dollars ($387,500) payable by the Originator to the Initial Purchaser for out-of-pocket expenses upon termination of this Agreement by the Issuer or the Originator pursuant to Section 8.02 or otherwise, as set forth in Section 7.02(b).
"Final Offering Memorandum" or "Final OM" means the final version of the Offering Memorandum relating to the Notes, including all exhibits, appendices, and supplements thereto, which was to be prepared and delivered prior to the Closing Date. The Final Offering Memorandum was never finalized.
"Indenture" means the Indenture between the Issuer and AFS, as indenture trustee, a draft of which is dated March 4, 2024, pursuant to which the Notes will be issued and the Receivables and related assets will be pledged as collateral for the benefit of the holders of the Notes.
"Indenture Trustee" means Atlantic Fiduciary Services, Inc., in its capacity as indenture trustee under the Indenture, having its principal office at 2 Christiana Centre, Suite 1400, Wilmington, Delaware 19801.
"Indemnified Party" has the meaning set forth in Section 9.01(a) of this Agreement.
"Initial Purchaser" means Halcyon Securities LLC, a Delaware limited liability company and registered broker-dealer, having its principal office at 200 Vesey Street, 42nd Floor, New York, New York 10281.
"Investment Company Act" means the Investment Company Act of 1940, as amended.
"Issuer" means SkyLend Receivables Trust 2024-1, a Delaware statutory trust (EIN 93-4201855), formed on February 14, 2024.
"Keymark" means Keymark Trust Company, N.A., having its principal office at 600 North King Street, Wilmington, Delaware 19801.
"Master Servicing Agreement" or "MSA" means the Master Servicing Agreement dated as of October 1, 2022, between SBF and Clearview, Servicing Account No. CLS-SBF-2022-0041, as the same may be amended, supplemented, or modified from time to time.
"Meridian" means Meridian Credit Ratings, Inc., the primary rating agency engaged to assign credit ratings to the Notes. The expected ratings from Meridian are Aaa(sf) for the Class A Notes and A2(sf) for the Class B Notes.
"Notes" means, collectively, the Class A Notes and the Class B Notes.
"Offering Memorandum" means, collectively, the Preliminary OM and the Final Offering Memorandum.
"Originator" means Skybridge Fintech Ltd., a Delaware corporation (EIN 84-3291076).
"Overcollateralization Target" means 3.5% of the initial Receivables pool balance, being Seven Million Dollars ($7,000,000), which represents the target level of overcollateralization to be achieved as credit enhancement for the Notes.
"Owner Trustee" means Keymark Trust Company, N.A., in its capacity as owner trustee of the Issuer under the Trust Agreement, having its principal office at 600 North King Street, Wilmington, Delaware 19801.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated organization, governmental authority, or other entity.
"Preliminary Offering Memorandum" or "Preliminary OM" means the offering memorandum dated April 5, 2024, prepared in connection with the offering and sale of the Notes, including all exhibits, appendices, and supplements thereto, which describes the Notes, the Receivables pool, the transaction structure, the parties to the transaction, credit enhancement, and related matters.
"Purchase Price" means, with respect to each class of Notes, one hundred percent (100%) of the aggregate principal amount thereof, less the allocable portion of the Underwriting discount, as more fully set forth in Section 2.02 of this Agreement.
"QIB" means a qualified institutional buyer, as defined in Rule 144A under the Securities Act.
"R&C" means Rowland & Cross LLP, the independent registered public accounting firm engaged to deliver the agreed-upon procedures letter and comfort letter in connection with the transactions contemplated hereby.
"Rating Agencies" means, collectively, Meridian and Carrollton.
"Receivables" means the unsecured consumer installment-loan receivables originated by SBF through the SkyLend platform that are transferred by the Originator to the Depositor pursuant to the Receivables Purchase Agreement and by the Depositor to the Issuer pursuant to the Sale and Servicing Agreement.
"Receivables Pool" means the pool of Receivables to be transferred to the Issuer, consisting of approximately 23,100 loans with an aggregate outstanding principal balance of approximately Two Hundred Thirteen Million Seven Hundred Fifty Thousand Dollars ($213,750,000) (gross, before haircuts and selection), which pool is to be cut to a final aggregate principal balance of Two Hundred Million Dollars ($200,000,000) as of the Cut-Off Date. The Receivables Pool has a weighted average coupon ("WAC") of 14.82%, a weighted average remaining term of 38.4 months, and a weighted average FICO score at origination of 698.
"Receivables Purchase Agreement" or "RPA" means the Receivables Purchase Agreement between SBF and the Depositor, a draft of which is dated March 11, 2024, pursuant to which SBF will sell and transfer Receivables to the Depositor.
"Regulation AB" means Regulation AB promulgated under the Securities Act, including Subpart 229.1100 through 229.1125 of Regulation S-K, to the extent applicable to the transactions contemplated by this Agreement.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Reserve Account" means the trust account to be established pursuant to the Indenture and funded at Closing in an amount equal to 1.00% of the initial Receivables pool balance, or Two Million Dollars ($2,000,000), to serve as a source of liquidity and credit enhancement for the benefit of the holders of the Notes.
"Residual Interest" means the Eight Million Dollars ($8,000,000) subordinated certificate representing approximately 4% of the total deal value, which certificate will be unrated and will be retained by SBF through SkyLend Funding LLC. The Residual Interest is subordinate in right of payment to the Notes and represents the first-loss position in the capital structure.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"C&H" means Calderwood & Harkness LLP, having its principal office at 425 Lexington Avenue, New York, New York 10017, serving as counsel to the Issuer and the Originator.
"Sale and Servicing Agreement" or "SSA" means the Sale and Servicing Agreement among the Depositor, the Issuer, SBF (in its capacity as servicer), and Clearview (in its capacity as sub-servicer), a draft of which is dated March 11, 2024.
"SBF" means Skybridge Fintech Ltd.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Servicing Fee" means the fee payable to the servicer and sub-servicer in an aggregate amount equal to 0.50% per annum of the outstanding Receivables pool balance, calculated and payable in accordance with the terms of the Sale and Servicing Agreement. The estimated first-year Servicing Fee is One Million Dollars ($1,000,000).
"SkyLend Platform" means the proprietary digital lending platform operated by SBF under the trade name "SkyLend," through which SBF originates unsecured consumer installment loans.
"Transaction Documents" means, collectively, the Indenture, the Receivables Purchase Agreement, the Sale and Servicing Agreement, the Administration Agreement, the Account Control Agreement, the Custodial Agreement, the Trust Agreement, and all other agreements, instruments, certificates, and documents executed and delivered in connection with the transactions contemplated by this Agreement.
"Trust Agreement" means the Trust Agreement dated as of February 14, 2024, between the Depositor and the Owner Trustee, pursuant to which the Issuer was formed as a Delaware statutory trust.
"Underwriting discount" means the discount payable to the Initial Purchaser in respect of its purchase and distribution of the Notes, in an amount equal to 1.00% of the aggregate principal amount of Two Hundred Million Dollars ($200,000,000) (aggregate principal amount of all Notes and certificates, including the retained Residual Interest), or Two Million Dollars ($2,000,000), calculated in accordance with the terms agreed in the Halcyon engagement letter dated February 20, 2024. The Underwriting discount is payable solely upon and subject to the occurrence of the Closing.
"WDP" means Whitfield, Drummond & Paige LLP, having its principal office at 51 West 52nd Street, New York, New York 10019, serving as counsel to the Initial Purchaser.
Section 1.02 — Rules of Construction
(a) Unless the context otherwise requires, (i) words in the singular include the plural and vice versa, (ii) words importing the masculine gender include the feminine and neuter genders and vice versa, (iii) "including" means "including without limitation," (iv) "hereof," "herein," "hereunder," and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement, and (v) references to "Articles," "Sections," "Exhibits," and "Schedules" are to Articles, Sections, Exhibits, and Schedules of this Agreement.
(b) References to any agreement, instrument, or document (including this Agreement) include all amendments, supplements, modifications, restatements, extensions, and renewals thereof, unless otherwise specified.
(c) References to any statute, law, rule, or regulation include all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting such statute, law, rule, or regulation.
(d) References to any Person include such Person's successors and permitted assigns.
(e) The headings and captions contained in this Agreement are for convenience of reference only, shall not be deemed to be part of this Agreement, and shall not affect the interpretation or construction hereof.
(f) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, and all defined terms shall be interpreted accordingly.
(g) The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision hereof.
(h) All monetary amounts referenced herein are denominated in United States Dollars unless otherwise expressly stated.
ARTICLE II — PURCHASE AND SALE OF THE NOTES
Section 2.01 — Agreement to Purchase
(a) Subject to the terms and conditions set forth in this Agreement, the Issuer hereby agrees to sell, and the Initial Purchaser hereby agrees to purchase from the Issuer, the following Notes:
(i) Class A Notes in the aggregate principal amount of One Hundred Seventy Million Dollars ($170,000,000); and
(ii) Class B Notes in the aggregate principal amount of Twenty-Two Million Dollars ($22,000,000).
(b) The total aggregate principal amount of Notes to be purchased by the Initial Purchaser pursuant to this Section 2.01 is One Hundred Ninety-Two Million Dollars ($192,000,000). For the avoidance of doubt, the Eight Million Dollars ($8,000,000) Residual Interest will be retained by SBF through the Depositor and is not being offered or sold to the Initial Purchaser pursuant to this Agreement.
(c) The obligation of the Initial Purchaser to purchase the Notes is subject to the satisfaction or waiver of each of the conditions precedent set forth in Section 5.01. The obligation of the Issuer and the Originator to consummate the sale is subject to the satisfaction or waiver of each of the conditions precedent set forth in Section 5.02.
Section 2.02 — Purchase Price
(a) The Purchase Price to be paid by the Initial Purchaser for the Class A Notes shall be equal to one hundred percent (100%) of the aggregate principal amount of the Class A Notes (being $170,000,000), less the allocable portion of the Underwriting discount attributable to the Class A Notes.
(b) The Purchase Price to be paid by the Initial Purchaser for the Class B Notes shall be equal to one hundred percent (100%) of the aggregate principal amount of the Class B Notes (being $22,000,000), less the allocable portion of the Underwriting discount attributable to the Class B Notes.
(c) The total Underwriting discount payable to the Initial Purchaser is Two Million Dollars ($2,000,000), calculated as 1.00% of the aggregate principal amount of all Notes and certificates issued by the Issuer, including the retained Residual Interest (i.e., 1.00% of $200,000,000), in accordance with the terms agreed in the Halcyon engagement letter dated February 20, 2024.
(d) For clarification, although the Initial Purchaser is purchasing Notes with an aggregate principal amount of $192,000,000 (excluding the $8,000,000 retained Residual Interest), the Underwriting discount of $2,000,000 is calculated on the full $200,000,000 aggregate deal value, as reflected in the agreed fee structure set forth in the Halcyon engagement letter. The allocable portion of the Underwriting discount shall be allocated between the Class A Notes and the Class B Notes on a pro rata basis based on their respective principal amounts, unless the Parties otherwise agree in writing prior to the Closing Date.
(e) Accordingly, the aggregate Purchase Price payable by the Initial Purchaser to the Issuer at Closing (before deducting the Underwriting discount) would be $192,000,000, and the net amount payable after deduction of the Underwriting discount would be $190,000,000, subject to any adjustments agreed upon by the Parties.
Section 2.03 — Delivery and Payment
(a) On the Closing Date, the Issuer shall cause the Notes to be delivered to the Initial Purchaser (or its designees) in book-entry form through the facilities of DTC, registered in the name of Cede & Co., as nominee for DTC, or in such other form as may be mutually agreed upon by the Issuer and the Initial Purchaser. The Notes shall be evidenced by one or more global notes in fully registered form substantially in the forms set forth in Exhibit A hereto.
(b) On the Closing Date, the Initial Purchaser shall pay the Purchase Price for the Notes in immediately available funds by wire transfer to the account or accounts designated in writing by the Issuer no later than two (2) Business Days prior to the Closing Date.
(c) The Closing shall take place at the offices of Calderwood & Harkness LLP, 425 Lexington Avenue, New York, New York 10017, or at such other place as the Parties may mutually agree in writing, at such time and on such date as shall be specified by the Parties, subject to the satisfaction or waiver of the conditions precedent set forth in Article V.
(d) Simultaneous with the Closing, the Originator shall cause the transfer of the Receivables from the Originator to the Depositor pursuant to the RPA, and from the Depositor to the Issuer pursuant to the SSA, and the Issuer shall grant a security interest in the Receivables and the related trust assets to the Indenture Trustee for the benefit of the holders of the Notes, all as contemplated by the Transaction Documents.
Section 2.04 — Resale by the Initial Purchaser
(a) The Initial Purchaser proposes to offer and resell the Notes only (i) to QIBs in reliance on the exemption from registration afforded by Rule 144A under the Securities Act and (ii) to Persons that are not "U.S. persons" (as defined in Regulation S) in offshore transactions in reliance on the exemption from registration afforded by Regulation S under the Securities Act.
(b) The Initial Purchaser shall not engage in any form of general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) in connection with the offering or sale of the Notes, including any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar medium or broadcast over television, radio, or the internet (other than the Offering Memorandum provided to eligible offerees), or any seminar or meeting whose attendees have been invited by any such general solicitation or general advertising.
(c) With respect to any Notes offered or sold in reliance on Regulation S, the Initial Purchaser shall not engage in any directed selling efforts (as defined in Regulation S) in the United States.
(d) Each subsequent purchaser of Notes in a Rule 144A transaction shall be deemed to have made the representations and agreements set forth in the Investor Letter substantially in the form of Exhibit B hereto, including a representation that such purchaser is a QIB within the meaning of Rule 144A.
(e) The Initial Purchaser agrees that it will deliver to each Person to whom it sells Notes a copy of the Final Offering Memorandum (or, prior to the availability of the Final Offering Memorandum, a copy of the Preliminary OM together with any supplements thereto), together with any applicable amendments or supplements.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE ISSUER AND THE ORIGINATOR
Section 3.01 — Representations and Warranties of the Issuer
The Issuer hereby represents and warrants to the Initial Purchaser as of the date hereof and as of the Closing Date as follows:
(a) Organization and Existence. The Issuer has been duly formed and is validly existing as a statutory trust in good standing under the laws of the State of Delaware. The Issuer has all requisite power and authority to own its assets, to conduct its business as presently conducted, and to execute, deliver, and perform its obligations under this Agreement and the Transaction Documents.
(b) Power and Authority. The Issuer has all necessary power and authority to execute and deliver this Agreement and each of the Transaction Documents to which it is a party and to perform all of its obligations hereunder and thereunder.
(c) Due Authorization, Execution, and Delivery. This Agreement has been duly authorized, executed, and delivered by the Issuer and, assuming due authorization, execution, and delivery by the other Parties hereto, constitutes the legal, valid, and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or similar laws affecting the rights of creditors generally and (ii) general principles of equity (whether considered in a proceeding in equity or at law).
(d) No Conflict. The execution, delivery, and performance by the Issuer of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate or conflict with the Trust Agreement or any other organizational document of the Issuer, (ii) violate or conflict with any applicable law, rule, regulation, order, judgment, or decree binding on the Issuer, or (iii) result in a breach of, constitute a default under, or require any consent under any agreement, instrument, or obligation to which the Issuer is a party or by which the Issuer or its assets are bound.
(e) No Registration Required. Assuming the accuracy of the representations and warranties of the Initial Purchaser set forth in Article IV and compliance by the Initial Purchaser with its covenants set forth in Section 6.02, no registration of the Notes under the Securities Act is required in connection with the offer and sale of the Notes as contemplated by this Agreement. The Notes are being offered and sold in reliance on the exemptions from registration afforded by Section 4(a)(2) of the Securities Act, Rule 144A, and Regulation S.
(f) Transaction Documents. The Trust Agreement, the Indenture, and each of the other Transaction Documents to which the Issuer is a party have been or, prior to the Closing Date, will be duly authorized, executed, and delivered by the Issuer and will constitute the legal, valid, and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to customary enforceability exceptions.
(g) Offering Memorandum. The Preliminary OM, as of its date and as of the Closing Date (as amended or supplemented by the Final OM), does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Issuer makes no representation or warranty with respect to any information furnished in writing by the Initial Purchaser expressly for inclusion in the Offering Memorandum, which information is limited to the information described in the last paragraph of the cover page of the Offering Memorandum and the information under the heading "Plan of Distribution" therein (to the extent relating to the Initial Purchaser).
(h) No Integration. The Issuer has not taken and will not take any action that would cause the offering of the Notes to be integrated with any other offering of securities by the Issuer, SBF, the Depositor, or any of their respective affiliates for purposes of Section 5 of the Securities Act or that would otherwise cause the exemption from registration relied upon in connection with the offering of the Notes to become unavailable.
(i) Investment Company Act. The Issuer is not, and after giving effect to the transactions contemplated by this Agreement and the Transaction Documents will not be, required to be registered as an "investment company" within the meaning of the Investment Company Act, in reliance on the exclusion from the definition of "investment company" set forth in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 promulgated thereunder.
(j) Regulation AB. The Issuer is and will be in compliance with Regulation AB promulgated under the Securities Act, to the extent applicable to the transactions contemplated by this Agreement and the Transaction Documents, including with respect to the disclosure requirements applicable to asset-backed securities offerings.
(k) Eligibility of Receivables. The Receivables included in the Receivables Pool meet, and as of the Closing Date will meet, the Eligibility Criteria set forth in the RPA and the SSA, including without limitation (i) the maximum single-obligor concentration limit of 0.15% of the initial pool balance (i.e., no single obligor shall have an outstanding principal balance in excess of Three Hundred Thousand Dollars ($300,000)) and (ii) the geographic concentration limit (no single state shall represent more than 20% of the aggregate outstanding principal balance of the Receivables Pool).
(l) No Litigation. There is no litigation, proceeding, investigation, or inquiry pending or, to the knowledge of the Issuer, threatened before or by any court, arbitrator, governmental body, or agency against or affecting the Issuer or any of its assets that could reasonably be expected to have a material adverse effect on the Issuer's ability to perform its obligations under this Agreement or the Transaction Documents, or on the validity, enforceability, or collectability of the Receivables.
Section 3.02 — Representations and Warranties of the Originator
The Originator hereby represents and warrants to the Initial Purchaser as of the date hereof and as of the Closing Date as follows:
(a) Organization and Existence. The Originator has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware (EIN 84-3291076). The Originator is duly qualified and licensed to do business and is in good standing in each jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification or licensing, except where the failure to be so qualified or licensed would not reasonably be expected to have a material adverse effect on the Originator's business, financial condition, or results of operations or on its ability to perform its obligations under this Agreement or the Transaction Documents.
(b) Power and Authority; Due Authorization. The Originator has all necessary corporate power and authority to execute and deliver this Agreement and each of the Transaction Documents to which it is a party and to perform all of its obligations hereunder and thereunder. This Agreement has been duly authorized by all necessary corporate action of the Originator, has been duly executed and delivered by the Originator, and constitutes the legal, valid, and binding obligation of the Originator, enforceable against the Originator in accordance with its terms, subject to customary enforceability exceptions.
(c) No Conflict; No Required Consents. The execution, delivery, and performance by the Originator of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate or conflict with the certificate of incorporation or bylaws of the Originator, (ii) violate or conflict with any applicable law, rule, regulation, order, judgment, or decree binding on the Originator, or (iii) result in a breach of, constitute a default under, or require any consent under any material agreement, instrument, or obligation to which the Originator is a party or by which the Originator or its assets are bound, except for such consents as have already been obtained and are in full force and effect. No consent, approval, authorization, order, registration, or qualification of or with any governmental authority or regulatory body is required for the valid authorization, execution, delivery, and performance by the Originator of this Agreement or the Transaction Documents, other than such consents, approvals, authorizations, orders, registrations, or qualifications as have already been obtained or as may be required under state securities or blue-sky laws.
(d) Financial Statements. SBF's financial statements, including SBF's audited financial statements for the fiscal year ended December 31, 2023 (which reflect total revenue of $187,300,000, total assets of $1,020,000,000, gross receivables of $876,500,000, and net receivables (after provision for credit losses) of $841,400,000), have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") consistently applied and fairly present, in all material respects, the financial condition, results of operations, and cash flows of SBF as of the dates and for the periods indicated therein.
(e) Licenses and Regulatory Compliance. SBF holds all material licenses, permits, registrations, and approvals required under applicable federal and state laws to originate consumer installment loans through the SkyLend platform in the jurisdictions in which it conducts such business. Without limiting the generality of the foregoing, the Originator is in compliance, in all material respects, with the Truth in Lending Act ("TILA") and Regulation Z, the Equal Credit Opportunity Act ("ECOA") and Regulation B, the Fair Credit Reporting Act ("FCRA"), the Fair Debt Collection Practices Act (to the extent applicable), the Gramm-Leach-Bliley Act and implementing privacy regulations, the Electronic Fund Transfer Act and Regulation E, applicable state lending, licensing, and usury laws, and all other applicable federal, state, and local consumer protection and lending laws and regulations.
(f) Origination of Receivables. The Receivables included in the Receivables Pool were originated by SBF in the ordinary course of its business and in accordance with SBF's underwriting guidelines and credit policies as in effect at the time of origination, which guidelines and policies have been provided to the Initial Purchaser and are described in the Preliminary OM. Each Receivable included in the Receivables Pool represents a bona fide extension of credit by SBF to an individual consumer borrower under a fully executed loan agreement.
(g) Lending Operations. As of December 31, 2023, SBF had approximately 312,000 active borrowers on its SkyLend platform and originated approximately $1.4 billion in aggregate consumer loan originations during the fiscal year ended December 31, 2023.
(h) No Material Adverse Change. Since December 31, 2023, there has been no material adverse change in SBF's business, properties, financial condition, results of operations, or prospects, and no event has occurred or condition exists that could reasonably be expected to result in such a material adverse change.
(i) Static-Pool Performance Data. The static-pool performance data included in the Preliminary OM is accurate and complete in all material respects and has been derived from servicing records maintained by Clearview in accordance with the terms of the MSA. Such data has been compiled and presented in a manner consistent with Regulation AB and applicable accounting standards and has not been selectively presented to create a misleading impression of the historical performance of loans originated by SBF through the SkyLend platform.
(j) Disclosure. SBF has disclosed to the Initial Purchaser all material information relating to (i) the Receivables and the Receivables Pool, (ii) the SkyLend platform, including the technology, algorithms, and credit models used in originating and underwriting consumer loans, (iii) SBF's origination, underwriting, and servicing practices, and (iv) any pending or threatened regulatory actions, investigations, or enforcement proceedings relating to SBF's consumer lending operations.
(k) Ownership. Pinnacle Growth Equity Partners, LP ("Pinnacle") owns 62.4% of SBF's fully diluted equity. Pinnacle made a Series C equity investment of Ninety-Five Million Dollars ($95,000,000) in SBF in 2021. No change of control of SBF has occurred since the date of Pinnacle's Series C investment, and no change of control is pending or contemplated.
(l) Platform Launch. The SkyLend platform was launched in approximately 2019, and SBF has been continuously originating consumer installment loans through the platform since its launch.
(m) No Litigation Affecting Receivables. There is no litigation, proceeding, investigation, or inquiry pending or, to the knowledge of the Originator, threatened before or by any court, arbitrator, governmental body, or agency that would reasonably be expected to (i) materially and adversely affect the Receivables or the Receivables Pool, (ii) call into question the validity or enforceability of any material portion of the Receivables, or (iii) materially and adversely affect SBF's ability to perform its obligations under this Agreement or any Transaction Document.
Section 3.03 — Representations and Warranties of the Depositor
The Depositor hereby represents and warrants to the Initial Purchaser as of the date hereof and as of the Closing Date as follows:
(a) Organization and Existence. The Depositor has been duly formed and is validly existing as a limited liability company in good standing under the laws of the State of Delaware (EIN 93-4187620). The Depositor was formed on January 30, 2024, for the specific purpose of acquiring Receivables from the Originator and transferring such Receivables to the Issuer in connection with the transactions contemplated by this Agreement and the Transaction Documents.
(b) Single-Member LLC; Sole Member. The Depositor is a single-member limited liability company. Skybridge Fintech Ltd. is the sole member of the Depositor. The manager of the Depositor is Danielle Prescott, Chief Financial Officer of SBF.
(c) Separateness and Bankruptcy Remoteness. The Depositor is in compliance with all separateness covenants and bankruptcy-remoteness provisions contained in its Limited Liability Company Agreement, including without limitation (i) maintaining separate books, records, and bank accounts, (ii) not commingling its assets with those of any other Person, (iii) conducting its business in its own name, (iv) maintaining arm's-length relationships with its affiliates, (v) not guaranteeing or assuming the obligations of any other Person, (vi) maintaining at least one independent manager whose consent is required for any voluntary filing of a bankruptcy petition, and (vii) holding itself out to the public as a legal entity separate and distinct from SBF and any other Person.
(d) Power and Authority; Due Authorization. The Depositor has all necessary limited liability company power and authority to execute and deliver this Agreement and each of the Transaction Documents to which it is a party and to perform all of its obligations hereunder and thereunder. This Agreement has been duly authorized, executed, and delivered by the Depositor and constitutes the legal, valid, and binding obligation of the Depositor, enforceable against the Depositor in accordance with its terms, subject to customary enforceability exceptions.
(e) No Conflict; No Required Consents. The execution, delivery, and performance by the Depositor of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby do not and will not violate or conflict with the Depositor's Limited Liability Company Agreement or any applicable law, rule, regulation, order, judgment, or decree, and do not require any consent, approval, or authorization that has not been obtained.
(f) True Sale. The transfer of the Receivables from the Depositor to the Issuer pursuant to the Sale and Servicing Agreement constitutes, and upon the Closing Date will constitute, a true sale and absolute transfer of such Receivables from the Depositor to the Issuer and not merely the grant of a security interest in such Receivables to secure a loan or other obligation. The Depositor has taken and will take all steps necessary to ensure that such transfer is characterized and treated as a true sale for all purposes, including for accounting, tax, and bankruptcy purposes.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE INITIAL PURCHASER
Section 4.01 — Representations and Warranties of the Initial Purchaser
The Initial Purchaser hereby represents and warrants to the Issuer, the Originator, and the Depositor as of the date hereof and as of the Closing Date as follows:
(a) Organization and Existence. The Initial Purchaser has been duly formed and is validly existing as a limited liability company in good standing under the laws of the State of Delaware. The Initial Purchaser is duly registered as a broker-dealer with the U.S. Securities and Exchange Commission under Section 15(b) of the Securities Exchange Act of 1934, as amended, and is a member of the Financial Industry Regulatory Authority, Inc.
(b) Power and Authority; Due Authorization. The Initial Purchaser has all necessary limited liability company power and authority to execute and deliver this Agreement and to perform all of its obligations hereunder. This Agreement has been duly authorized, executed, and delivered by the Initial Purchaser and constitutes the legal, valid, and binding obligation of the Initial Purchaser, enforceable against the Initial Purchaser in accordance with its terms, subject to customary enforceability exceptions.
(c) No Conflict. The execution, delivery, and performance by the Initial Purchaser of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate or conflict with the organizational documents of the Initial Purchaser or (ii) violate or conflict with any applicable law, rule, regulation, order, judgment, or decree binding on the Initial Purchaser.
(d) Compliance with Rule 144A and Regulation S. The Initial Purchaser will offer and sell the Notes only in accordance with Rule 144A and Regulation S, as applicable. Each offer and sale of Notes by the Initial Purchaser in the United States will be made only to Persons that the Initial Purchaser reasonably believes to be QIBs within the meaning of Rule 144A, and each offer and sale of Notes outside the United States will be made only to Persons that are not "U.S. persons" (as defined in Regulation S) in offshore transactions in compliance with Regulation S.
(e) No General Solicitation. The Initial Purchaser has not engaged and will not engage in any form of general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) in connection with the offering of the Notes, and the Initial Purchaser has not offered and will not offer the Notes by any form of general solicitation or general advertising, including any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar medium or broadcast over television, radio, or the internet, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
(f) Due Diligence. The Initial Purchaser has conducted its own independent investigation and due diligence regarding the Issuer, the Originator, the Depositor, the Receivables Pool, the SkyLend platform, and the transaction structure. In connection with such due diligence, the Initial Purchaser has engaged Broadleaf Analytics Group LLC to perform independent loan-level due diligence and re-underwriting of a stratified random sample of approximately 1,500 loans (representing approximately 6.5% of the Receivables Pool by loan count). The Initial Purchaser acknowledges that it is entering into this Agreement based on its own investigation and analysis, and not in reliance on any representation or warranty of the Issuer, the Originator, or the Depositor other than as expressly set forth in Article III.
(g) No Registration. The Initial Purchaser acknowledges that the Notes have not been and will not be registered under the Securities Act, that the Notes are being offered and sold in reliance on exemptions from registration under the Securities Act, and that the Notes may not be offered or resold except in compliance with Rule 144A, Regulation S, or another applicable exemption from registration.
ARTICLE V — CONDITIONS PRECEDENT TO CLOSING
Section 5.01 — Conditions to the Initial Purchaser's Obligations
The obligation of the Initial Purchaser to purchase the Notes at the Closing is subject to the satisfaction (or waiver by the Initial Purchaser in its sole discretion) of each of the following conditions precedent on or before the Closing Date:
(a) Accuracy of Representations and Warranties. Each of the representations and warranties of the Issuer, the Originator, and the Depositor contained in Article III shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specific date).
(b) Performance of Obligations. Each of the Issuer, the Originator, and the Depositor shall have performed and complied with, in all material respects, all of its obligations, covenants, and agreements contained in this Agreement and the Transaction Documents that are required to be performed or complied with on or before the Closing Date.
(c) Delivery of Executed Transaction Documents. The following Transaction Documents shall have been duly authorized, executed, and delivered by all parties thereto, and the Initial Purchaser shall have received fully executed counterparts of each:
(i) the Indenture, between the Issuer and AFS, as indenture trustee;
(ii) the Trust Agreement, between the Depositor and Keymark, as owner trustee;
(iii) the Receivables Purchase Agreement, between SBF and the Depositor;
(iv) the Sale and Servicing Agreement, among the Depositor, the Issuer, SBF (as servicer), and Clearview (as sub-servicer);
(v) the Administration Agreement, between the Issuer and SBF;
(vi) the Account Control Agreement, among the Issuer, AFS, and Keymark; and
(vii) the Custodial Agreement, among the Issuer, the Depositor, and AFS.
(d) Delivery of Legal Opinions. The Initial Purchaser shall have received the following legal opinions and letters, each dated as of the Closing Date, in form and substance satisfactory to the Initial Purchaser and WDP:
(i) a true-sale opinion from C&H, opining that the transfer of Receivables from the Originator to the Depositor and from the Depositor to the Issuer constitutes a "true sale" and would not be recharacterized as a secured financing in a bankruptcy or insolvency proceeding of the Originator or the Depositor;
(ii) a non-consolidation opinion from C&H, opining that, in the event of a bankruptcy or insolvency of SBF, a court would not substantively consolidate the assets and liabilities of the Issuer with those of SBF or the Depositor;
(iii) a security-interest opinion from C&H, opining that the Indenture creates a valid and perfected first-priority security interest in the Receivables and the related trust assets in favor of the Indenture Trustee for the benefit of the holders of the Notes, and that UCC financing statements have been properly filed to perfect such security interest;
(iv) a tax opinion or memorandum from C&H addressing the federal income tax treatment of the Issuer as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code, and the characterization of the Notes as debt for federal income tax purposes;
(v) a negative-assurance letter (commonly referred to as a "10b-5 letter") from C&H addressed to the Initial Purchaser, to the effect that, based on C&H's participation in the preparation of the Offering Memorandum, nothing has come to C&H's attention that causes them to believe that the Offering Memorandum (as of its date and as of the Closing Date), as it relates to the Issuer, the Originator, the Depositor, the Receivables Pool, and the Transaction Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and
(vi) an opinion of WDP, as counsel to the Initial Purchaser, as to the due authorization and enforceability of this Agreement against the Initial Purchaser, and as to such other matters as the Initial Purchaser may reasonably request.
(e) Officer's Certificate. The Initial Purchaser shall have received a certificate of an authorized officer of SBF (to be executed by Danielle Prescott, Chief Financial Officer, or Arun Mehta, Chief Executive Officer), dated as of the Closing Date, certifying (i) the accuracy of the representations and warranties of the Originator and the Depositor contained in Article III as of the Closing Date, (ii) the compliance of the Receivables in the Receivables Pool with the Eligibility Criteria, and (iii) the performance by the Originator and the Depositor of all obligations required to be performed by them on or before the Closing Date.
(f) Bring-Down Certificate. The Initial Purchaser shall have received a bring-down certificate, dated as of the Closing Date, from each of the Issuer, the Originator, and the Depositor, confirming that all representations and warranties of such party contained in Article III remain true and correct in all material respects as of the Closing Date.
(g) Agreed-Upon Procedures and Comfort Letter. The Initial Purchaser shall have received (i) an agreed-upon procedures ("AUP") letter and (ii) a comfort letter, each from Rowland & Cross LLP (engagement partner: Nathan Delacroix), each dated as of the Closing Date, in form and substance satisfactory to the Initial Purchaser and WDP, covering such matters as the Initial Purchaser may reasonably request, including verification of the financial and statistical data included in the Offering Memorandum relating to the Receivables Pool and SBF's financial statements.
(h) Ratings. The Initial Purchaser shall have received written confirmation from each of the Rating Agencies of the assignment of the following final credit ratings to the Notes, and no such rating shall have been withdrawn, suspended, downgraded, or placed on negative watch or developing watch:
(i) Meridian: Aaa(sf) for the Class A Notes and A2(sf) for the Class B Notes; and
(ii) Carrollton: AA+(sf) for the Class A Notes and A(sf) for the Class B Notes.
(i) Final Offering Memorandum. The Initial Purchaser shall have received the Final Offering Memorandum, in form and substance satisfactory to the Initial Purchaser and WDP, including all supplements and amendments thereto.
(j) Funding of Reserve Account. The Reserve Account shall have been funded in the amount of Two Million Dollars ($2,000,000), representing 1.00% of the initial Receivables pool balance, in accordance with the terms of the Indenture.
(k) Overcollateralization Target. The Overcollateralization Target of Seven Million Dollars ($7,000,000), representing 3.5% of the initial Receivables pool balance, shall have been achieved through the inclusion in the Receivables Pool of Receivables with an aggregate outstanding principal balance in excess of the aggregate principal amount of the Notes by at least such amount.