A revenue stream of equipment loans and leases on commercial equipment will securitize $445.4 million in asset-backed securities on the way to investors from the CCG Receivables Trust 2023-2.
Wells Fargo Securities, BMO Capital Markets, BofA Securities, J.P.Morgan Securities and U.S. Bancorp Investments are lead underwriters on the deal, which is slated to close on November 14, according to ratings analysts at Moody's Investors Service.
The trust will issue notes through five tranches, Moody's said. Coupons are still to be determined on the notes, but Moody's did highlight the fact that all of the classes have initial reserves of 1.0%. The A1 and A2 notes, the two senior notes in the payment priority, have the same level of total hard credit enhancement, 17.6%, Moody's said. S&P Global Ratings also assessed the deal and noted that the most senior notes, the A1 class, have a legal final maturity date in Nov. 14, 2024, while the rest of the tranches in the deal legally and finally mature on April 14, 2032.
Some key strengths on the deal include a robust underwriting process and short weighted average (WA) original terms on the underlying loans and leases, Moody's said. On the latter, for instance, the leases and loans backing the notes has a WA original term of 54 months and a remaining WA term of 47 months, the rating agency said.
The collateral pool has some 1,902 contracts distributed largely among the construction, transportation and waste industries, which account for 44.4%, 32.9% and 12.0% of the pool, respectively, Moody's said.
In the event of an obligor default, Moody's said, the CCG Receivables Trust has significant recoveries. Historically, CCG Receivables Trust's net loss rates are very low when compared to defaults due to very high recovery rates on defaulted assets, the company said.
Yet Moody's also flagged a number of potential credit challenges, one of which is the prevalence of small, unrated obligors. Commercial Credit Group primarily targets middle-market businesses that are not rated, which casts a shroud over their default probabilities. Also, machine tools account for about 10.45% of the pool, according to Moody's, and the trouble is with limited historical performance of that segment. In fact, there is no loss data through a full economic cycle.
Moody's expects to assign 'P1' to the A1 notes; 'Aaa' to the A2 notes; 'Aa2' to the class B notes; 'A1' to the class C notes and 'Baa2' to the class D notes. S&P, meanwhile, assigns 'A1+'; 'AAA' to the A2 notes; 'AA' to the class B notes; 'A' to the class C notes and 'BBB+' to the class D notes.
