Cronos Containers upsized its latest container lease securitization, CRNN 2014-2, by $50 million and priced the bonds on Thursday, according to a person familiar with the deal.
Cronos Containers Program I Ltd Series 2014-2 issued the Standard & Poor's 'A+' rated, 4.5 years bonds at a yield of 3.3%, according to an Interactive Data report.
This is the second container lease securitization for the issuer in 2014. In the first deal, series 2014-1, the 4.5 years bonds yielded 3.07%. Deutsche Bank managed both transactions.
The notes in the issuer’s latest deal are backed by an approximately $1.072 billion (net book value) portfolio of 216,744 containers. This collateral will be shared with trust’s series 2012-2, 2013-1, and 2014-1 issuances.
Among the deal’s strengths, according to S&P, is the fact that approximately 80.6% of the portfolio comprises long-term leases and direct finance leases (DFLs), which are shielded from rate reductions during a downturn. Also, the pool is diversification among different marine cargo container types, most of which benefit from relatively stable demand.
Among its weaknesses, approximately 45.0% of the pool is held by the 10 biggest customers, the performance of which may affect the issuer's revenue receipts. Also, the DFLs could potentially be "recharacterized" as secured debt if a lessee files for bankruptcy.
Demand for cargo containers is primarily based on the volume of world trade, which follows economic cycles. Despite the 4% growth in 2014, the marine cargo container market is still below the historical average. But the container leasing market has relatively high utilization rates, causing tight supply, which S&P views as a strength for the deal.
So far issuance of container lease securitizations this year totals $2.4 billion from 8 deals compared to $3.2 billion from 12 deals for all of 2013, according to S&P.