Mid-market business equipment leasing firms Ascentium Capital and Axis Capital has each launched securitizations of recent contract pools.
Houston-based Ascentium is structuring a $285 million notes package backed by receivables from $257.2 million in lease contracts for small-ticket items it supplies to physician offices, gas stations, hotels, restaurants and other clientele.
The products being leased include medical equipment, vehicles and furniture. The leases are made to proprietors who carry an average weighted FICO score of 760.
Ascentium Equipment Receivables 2016-2 Trust is a seven-class notes structure headed by $223 million in Class A bond tranches that feature 23% hard credit enhancement (including a 4.8% overcollateralization cushion totaling $13.5 million).
The Class A bonds carry preliminary triple-A structured finance ratings in presale reports from Moody’s Investors Service and Fitch Ratings.
The aggregate discounted contract balance is $257.2 million through 5,864 contracts belonging to 5,425 obligors (nearly 19% of them concentrated in California). The average remaining principal balance is $43,858.
Ascentium, founded in 2011 and owned by funds managed by Luther King Capital Management and Vulcan Capital, has a managed lease portfolio sized at $990.8 million. The compounded annual growth in originations has exceeded 30% since its founding, which has contributed to weakening asset performance for each securitization introduced into the market since 2012.
The 2016-2 pool is less diversified in its obligor industries, according to Moody’s, exposing it to additional risk to volatility in specific subsectors.
The transaction is built as a “full turbo” structure where all excess spread pays down the notes on a sequential basis, causing CE to continually grow as a percentage of outstanding pool balance.
Credit Suisse, Bank of America Merrill Lynch, BMO Capital Markets and J.P. Morgan were the deal’s lead undewriters.
Axis Capital out of Grand Island, Neb., is securitizing primarily long-haul and heavy-equipment lease contracts from the trucking and hospitality sectors through a notes offering sized at $201.23 million.
The Axis transaction includes $166.4 million in Class A notes for which Kroll Bond Rating Agency has assigned preliminary ‘AAA’ structuring finance ratings.
The pool consists of collateral currently totaling $180.5 million; Axis will have a 90-day period after the closing date of the deal to add up to $30 million in additional leases, which are primarily trailers (14.58% of the pool), long-haul equipment (10.65%), short-haul (10.10%) and food service (10.15%).
Nearly 90% of the obligors are considered to have strong credit profiles with average weighted FICOs of 706.
Wells Fargo is the deal’s structuring agent.
One note of caution, KBRA noted, is that Axis is involved in active litigation with two former senior executives, according to Kroll. Those executives were terminated in early 2016, and have since filed a lawsuit against the company.