American Railcar Leasing (ARL) is marketing $625.5 million of railcar equipment lease-backed notes.

The transaction, Longtrain Leasing III, will offer two tranches of class A notes that have been assigned a preliminary ‘A’ rating by Standard & Poor's.  The notes hvae weighted average life of 10 years. ARL was last in the market in June 2014 with a $325 million securitization.

ARL’s latest deal is backed by a portfolio of 6.081 railcars. The issuer has the right to lease revenues from the portfolio and any residual cash flows from the sale of railcars. As of Sept. 30, 2014, ARL's managed fleet consisted of approximately 38,748 railcars that have a utilization rate of 98.4%.

Railcars are exposed to the risk that government will require that railcars be removed from service for retrofitting.

However S&P's presale state that there is typically a long lead time for government mandated improvement programs, giving the issuer plenty of advance notice. Further, the railcars included in the securitized portfolio are relatively young (1.6 years) and are less likely to be targeted for retrofit. Railcars generally have a useful life of 35 years or more.

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