Vehicle fleet lease contracts remain popular, as the ARI Fleet Lease Trust 2024-B prepares to sell $657.6 million in notes to securitization bond investors.
Yet the deal shows smaller concentrations of assets that are publicly rated and are of investment grade quality, according to ratings analysts at Fitch Ratings. Most of the pool assets, 65%, carry a rating from a nationally recognized statistical rating organization, and about a third of the pool, 33.3%, is investment grade. Both are a dip from the 67.5% and 30.8% seen in the series 2024A.
Automotive Rentals is sponsoring the deal, for which JPMorgan Chase Bank is the lead underwriter, Fitch analysts said. Bank of America Merrill Lynch, BMO Capital Markets, J.P.Morgan Securities and SunTrust Robinson Humphrey Capital Markets are managers on the deal, slated to close on June 28, according to Asset Securitization Report's deal database.
Notes are expected to pay investors yields of 5.6% on the F1+ rated A1 notes to 5.6% on the A-rated C notes, the database said.
The capital structure will issue notes to investors and repay them through five tranches of classes A through C notes, according to the rating agency. The A1 through A3 notes all benefit from 10.50% in credit enhancement levels, while the B and C tranches are covered to a level of 8.50% and 6.50%, respectively.
ARI 2024-B is supported by revenue from underlying contracts, through 18,999 leases that represent 463 obligors from a diverse array of industries, Fitch said. Contracts extended to plumbing, heating and air conditioning contractors account for 6.1% of the pool, smaller than the share for the top industry in the 2027-A, at 8.6%. On average, the obligors have a balance of $1.5 million, according to Fitch.
On a weighted average (WA) basis, the leases have an original term of 59 months, which are financing light-duty trucks, medium-duty trucks and heavy-duty trucks that account for 70.9%, 14.3% and 7.1% of the collateral pool, according to the rating agency. Cars and equipment leases account for 4.0% and 3.6% of the pool, respectively.
As for the pool's geographic distribution, Texas, California, Florida, Pennsylvania and Georgia account for 17.2%, 9.8%, 6.7%, 4.1% and 3.5%, respectively.
Fitch assigns F1+ to the A1 notes; AAA to the A2 and A3 notes; AA to the class B notes and A to the C tranche notes.
