Automobile fleet leases will support a pool of special units of beneficial interest backing $750 million in securitization bonds from the Chesapeake Funding II, series 2024-1.
Slated to close in about one week, the trust will issue classes A, B, C and D notes through five tranches, according to ratings analysts at Moody's Investors Service and Fitch Ratings. All the notes have the same legal final maturity date, May 15, 2036. A pool of open-end vehicle fleet lease and loan contracts for cars, trucks and other vehicles provide the revenues to the bonds.
Element Fleet originated the contracts, according to Fitch Ratings. The pool contains 660 obligors representing 101,300 leases, 66.7% of which have public rating agency ratings, and of that group 40% are investment grade, Fitch said. They have a weighted average (WA) rating of 'BB', while Fitch assumes a 'B' rating for unrated obligors.
J.P.Morgan Securities is lead arranger, while Element Fleet is also acting as servicer.
The notes enjoy hard credit enhancement levels of 12.19%, 10.33%, 7.65% and 4.71%, on the classes A, B, C and D tranches, respectively. Almost all the notes are fixed, except for the A2 tranche, which could be priced on a floating rate, according to Moody's Investors Service
The pool composition is slightly more concentrated than the pool from the 2023-2 deal, the rating agency said, but concentrations by geographic location, industry and obligor remained diverse for the Chesapeake Funding II, 2024-1 deal. Along those lines California represents 13.2% of obligor locations, Texas represents 12.6% and Michigan, Florida and Georgia represent 7.3%, 5.9% and 4.6%, respectively. The largest obligor represents 7.0% of the pool and the top five account for 19.7%.
In terms of vehicle types, light-duty trucks account for the share of the pool, at 80.3%, with cars, medium- and heavy-duty trucks each account for a single-digit share of the pool.
Moody's assigns Aaa ratings to the two tranches of A notes; Aa1 to the class B notes; Aa2 to the class C notes and Baa2 to the class D notes. Fitch, meanwhile assigns AAA to the A1 and A2 notes; and AA, A and BBB to the B, C and D notes.
