© 2024 Arizent. All rights reserved.

ARI Cuts Oil/Gas Exposure in $575.2M Truck Fleet ABS

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.

For reprint and licensing requests for this article, click here.
ABS
MORE FROM ASSET SECURITIZATION REPORT