Commercial truck lessor Automotive Rentals Inc. (ARI) is sharply reducing exposure to oil & gas exploration clients in its new $575.2 million fleet securitization of specialty vehicle leases.

According to presale reports issued Wednesday by Fitch Ratings and S&P Global Ratings, open-end truck lease contracts to oil & gas companies account for only 4.68% of the collateral for ARI Fleet Lease Trust 2017-A, down from more than 11% in ARI’s only 2016 transaction.

The collateral for the latest deal is more diverse in other ways: the top five industry concentration was taken down to 20.1% from 30% in last year’s year. The top five obligor exposure was also reduced to 14.4% from 16%, according to the pre-sale reports.

Both Fitch and S&P expect to assign triple-A ratings to the nine-year series A-2 notes ($305 million) and A-3 notes ($77.27 million), as well as their respective short-term F1/A-1 ratings to the one-year money market tranche sized at $193 million.   

The bonds are supported by a 9% initial credit-enhancement and a target level of 14.25%, based on projected cumulative net losses of 8.75%-9.25% by S&P. (Fitch modeled a stressed-loss level of 11.1%).

In last year's deal, ARI required only a target CE of 13.6%.

The open-end leases (a vast majority of which are fixed rate) are pooled from the privately owned ARI’s managed portfolio of $3.56 billion in leases, as of year’s end 2016.

ARI, established in 1948, is the second-largest lessor of light-, medium- and heavy-duty trucks to commercial firms in the U.S. This is its eighth trip to the securitization market.

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