Borrowing from the credit card, mortgage and CDO sectors, Cendant Corp. has unveiled the latest structural innovation to the ABS market. Named Terrapin Funding, structural advisor and underwriter Lehman Brothers has developed a transaction that allows Cendant to essentially delink senior classes of fleet lease securitizations and pre-fund subordination for future offerings. The trust is named after the Hunt Valley, Maryland headquarters of auto fleet leasing unit PHH Vehicle Management.

Terrapin is a resecuritization of the preferred membership interest cash flows of Chesapeake Funding, which were earmarked for the subordinated classes, and which have already paid down. Specifically, Terrapin will provide enhancement for the 2001-1, 2002-1 series and pre-fund the subordination for the yet-to-be-issued 2003-1 series. The 2002-2 series, according to the Moody's Investors Service presale report, was not structured with preferred membership interests.

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