NewtekOne's $184M ALP Loan Securitization: A Strategic Win in Challenging Markets

NewtekOne, Inc. has solidified its position as a leader in alternative lending with the successful closing of its $184 million securitization backed by $216.56 million in Alternative Loan Program (ALP) loans. The NALP Business Loan Trust 2025-1 transaction not only marks the company’s third ALP-backed securitization but also its 16th rated deal overall, underscoring its ability to consistently attract institutional capital. This move comes amid macroeconomic uncertainty, positioning NewtekOne to capitalize on demand for high-yield, structured finance products.

The Structure: A Refined Approach to Risk and Return

The securitization was divided into three note classes, each carrying distinct risk profiles and yields:
- Class A Notes: $155.9 million rated "A (low) (sf)" by Morningstar DBRS, priced at a 6.338% yield.
- Class B Notes: $23.8 million rated "BBB (sf)", priced at 7.838%.
- Class C Notes: $4.3 million rated "BB (sf)", priced at 10.338%.

The weighted average yield across all classes stands at 6.62%, while the advance rate—a key metric reflecting the proportion of collateral pledged—improved to 85%, up from 80% in the prior year’s deal. This increase reflects investor confidence in NewtekOne’s underwriting discipline and the robust performance of its ALP portfolio.

Credit Metrics: A Strong Foundation for Growth

The transaction’s collateral pool consists of $184.4 million in originated ALP loans and a $32.15 million prefunding account, which will be used to acquire additional loans. The gross weighted average coupon of the underlying loans is 13.30%, with a servicing fee of 100 basis points retained by NewtekOne reducing this to a net 12.30%. This creates a 570 basis point spread between the net coupon and the notes’ weighted average yield, providing a substantial buffer for investors.

NewtekOne’s track record is equally compelling: since launching ALP in 2019, it has originated $480 million in loans, with only four defaults and zero charge-offs to date. Management attributes this resilience to the program’s rigorous underwriting standards, which require collateralized business assets (e.g., commercial real estate, inventory) and personal guarantees from equity owners holding 20%+ stakes. This structure, combined with liens on personal assets, has historically reduced default risk compared to traditional small-business lending programs like the SBA 7(a).

Strategic Implications: Scaling Amid Economic Headwinds

The transaction’s two times oversubscription by 10 institutional investors—including major money managers and insurers—highlights the growing appeal of ALP-backed securities. This demand allows NewtekOne to recycle capital efficiently, fund its 2025 growth targets, and reaffirm its EPS guidance of $2.10–$2.50, despite broader economic challenges.

The company aims to originate 2,700 ALP loans in 2025, up from 2,400 in 2024, with an average loan size of $4 million—9x larger than the $450,000 average for SBA 7(a) loans. This scale accelerates portfolio growth, while the securitization structure ensures liquidity for reinvestment.

Operational Resilience and Diversification

NewtekOne’s financial holding company structure further strengthens its position. Its banking subsidiary, Newtek Bank, N.A., provides diversified funding options and client services, while recent initiatives—such as a $30 million debt offering at 8.375% and cost savings from a remote workforce—enhance its balance sheet flexibility.

Conclusion: A Compelling Investment Case

NewtekOne’s 2025-1 securitization is a testament to its ability to execute in challenging markets. With a 570 basis point margin, a zero-charge-off record, and institutional demand driving oversubscription, the transaction reinforces the company’s creditworthiness.

The data paints a clear picture:
- Credit quality: Only four defaults across $480 million in ALP loans since 2019.
- Growth trajectory: A 12.5% increase in loan units (2,700 in 2025 vs. 2,400 in 2024) leveraging larger loan sizes.
- Financial resilience: Reaffirmed 2025 EPS guidance of $2.10–$2.50, supported by a 85% advance rate and robust collateral.

Investors seeking exposure to alternative lending in a risk-averse environment would be wise to consider NewtekOne’s structured products. The widening spread between the ALP net coupon and note yields, combined with the company’s diversified revenue streams, positions it to outperform peers in an uncertain macro backdrop. As NewtekOne continues to refine its securitization strategy, this deal sets the stage for sustained growth and value creation.