The fleet of auto securitization deals continues to roll out, with Chesapeake Funding II, 2023-2 coming to the market to sell $750 million in asset-backed securities to investors.
While the ultimate collateral consists of payments on a pool of open-end vehicle fleet leases and loans, special units of beneficial interests (SUBI) in the leases and loans will secure the notes, according to Moody's Investors Service.
Having just priced, the transaction is heading for a final September 29 close, with four classes of notes offered to investors and the class D notes retained, according to Asset Securitization Report's deal database. Almost all of the notes are fixed rate, and benchmarked to the three-month interpolated yield curve. The one exception is the class A-2 notes, which are expected to be priced off of the one-month Secured Overnight Financing Rate (SOFR), ASR's data indicates.
Ratings analysts from Moody's and Fitch Ratings say all of the notes have the same legal final maturity date—October 15, 2035. The transaction has no revolving period, says Moody's, but new assets can be added to the master trust through the variable funding note and excess collections. TD Securities is the lead arranger on the deal.
Fitch expressed confidence in two major highlights: the Chesapeake securitization program's asset performance has been strong, historically, similar to Element Fleet Management's managed portfolio of contracts. Fitch also notes that companies with public ratings from a national recognized rating agency make up 66.9% of the obligors in the pool, and those with an investment-grade rating represent 34.9% of the pool. The leases have a weighted average (WA) remaining term of 45 months, slightly longer than 44 months in the 2023-1 transaction.
Obligors are slightly more concentrated in the current pool than the 2023-1 transaction, but that is just one attribute reflecting a pool that remains diversified overall, Fitch said. This applies to other aspects, including geography and notably, industry. Passenger car rental represents the top industry, with 7.2% of the pool, for instance.
The notes have limited residual value risk, says Moody's. About 92.7% of the pool will be open-end leases, while 7.2% of the collateral will be loans, which will be exposed to residual value risk in the event of an obligor default.
Moody's expects to assign ratings of 'Aaa' to classes A-1 through class B; 'Aa2' through class C and 'Baa1' to class D notes.
Fitch will give 'AAA' to the A-1 through A-2 notes; 'AA' to the class B notes; 'A' to the class C notes and 'BBB' to the class D notes.
