Donna M. Mitchell

Classes A, B, C and D have hard credit enhancement levels of 5.30%, 3.80%, 2.30% and 0.85%, respectively, higher than that of the CHAOT 2022-A.

The sponsor's assets favor software companies, and the deal brings its total CLO assets under management to $2.2 billion.

Slated to close by September 29, the deal has total initial hard credit enhancement that amounts to 87.7% on the most senior class of notes.

Total hard credit enhancement of 37.45% shore up the class A notes, according to Moody's. In the rest of the deal the classes B, C and D notes benefit from total hard credit enhancement of 33.1%, 23.7% and 13.7%, respectively.

Revenue from agricultural and construction equipment will secure the notes, which get a boost from a spread account and overcollateralization.

Credit enhancement to the class A notes includes a non-declining overcollateralization of 4.75% of the initial adjusted pool balance, and a non-declining reserve fund of 0.25% of the initial adjusted pool balance.

The OCCU 2023-1 transaction will come to market as a 144a transaction, with higher levels of credit enhancement from yield supplement overcollateralization, initial hard credit enhancement and excess spread.

Subordination increased for the class A and class C notes, to 7.04% and 2.10%, respectively, from 7.00% and 1.50%. Meanwhile subordination decreased on the class B notes to 3.80%, from 4.25%.

Backed by revenue from point-of-sale unsecured consumer loans, the upsized deal also features expandable notes.

The transaction's credit enhancement levels are lower than what was seen on the 2023-A pool, but is still strong, and is still high compared with peer transactions.

Tractors make up the vast majority of the vehicles in the pool, 92.5%, while trailers, trucks and buses account for 4.1%, 2.3% and 1.1%, respectively.

Rating agencies say the A, B, C and D notes have about 29.0%, 23.8%, 17.3% and 14.0% in credit enhancement, respectively, while A, B, and C notes enjoy a 15.9%, 10.6% and 4.0% in subordination.

Companies with public ratings from a national recognized rating agency make up 66.9% of the obligors in the pool, and those with an investment-grade rating represent 34.9% of the pool.

The notes benefit from a step-up event concerning class D. If an optional redemption does not occur in the expected redemption date, then the interest rate on the class D notes will increase by 3.0%.

Notes will repay principal to investors sequentially. All junior notes will be shut out from receiving any principal payments until the immediate senior notes are paid.

The pool has a 25% concentration limit for electric vehicles, up from 15% from Series 2023-5. This increases risks to the transaction, because residual values on those types of cars are still unknown.

Virtually all of the attributes in VZMT 2023-5 and 2023-6 are identical, such as the statistical cutoff date (August 7), aggregate principal balance ($23 billion) and weighted average (WA) remaining installments, 26 months.

The distribution of dealers among the top categories have improved, while the floorplan loans have monthly payment rates that are at record highs.

One potential credit drawback is that 25% of the pool finances construction equipment loans.

Some 24% of the pool has 76- to 84-month contracts. This deprives observers and investors of robust performance data, because of the lack of seasoning.