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CCG's next equipment-finance ABS includes machine tools

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Specialty equipment-finance provider Commercial Credit Group (CCG) is building out its latest securitization with loan and lease contracts from its newly acquired machine-tools business.

The new $305.7 million CCG Receivables Trust 2018-1 has less than 5% of the receivables in the collateral pool derived from the machine-tool and fabrication equipment finance division it created following last year’s acquisition of Manufacturers Capital, however. The bulk of the collateral consists of CCG’s core equipment-finance business, which caters to the construction, transportation and waste management industries.

Rating agency views of the impact of the new mix of collateral on credit quality are mixed. DBRS feels that the inclusion of machine tool leases will improve retention and renewal rates. However, S&P Global Ratings cautions that the new business brings some uncertainty to deal performance, and has adjusted its expectations for levels upward.

The senior tranche of Class A term notes to be issued in the deal is rated triple-A by both DBRS and S&P as well as by Fitch Ratings. Cedit enhancement for this trnche has been increased to 15.55%, including 12.2% subordination, an excess spread of approximately 6.06% and over collateralization of 2.35%, with an overcollateralization target of 7.5%. By comparison, the senior term tranche of the prior deal had initial CE of 14.3, according to S&P.

S&P and Fitch also expect to assign single-A ratings to the Class B notes and triple-B ratings to the Class C notes. All of the term notes are due in 2025.

There is also tranche of money market notes with op ratings from each of the three ratings agencies (A-1+ from S&P, R-1 (high) from DBRS and F1+ by Fitch).

The notes will be backed from the receivables of 2,021 contracts with 1,318 obligors that have an average net-book value of $237,520 on their contracts that carry an average APR of 9.76 and 52 original-month terms. The contracts are seasoned an average of nine months.

Most of the contracts (44%) involve equipment for transportation industry firms, 35% for construction and 13% for waste management.

CCG, established in 2004 and based in Charlotte, N.C., has originated over $3 billion in equipment loans and leases. The existing net book value of the portfolio is $828.7 million.

The company has seen a slight uptick in 61-to-90-day delinquencies to 1.53%, compared with 1.12% last year and the highest total since 2010 (1.8%). DBRS has assigned an expected cumulative loss assumption of 2.25%, with Fitch Ratings assigning a 3.1% CNL proxy. S&P has set a CNL range of 2.4%-3.1% on the deal.

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Equipment ABS Esoteric ABS S&P DBRS Morningstar Fitch