Transportation equipment loans and leases will secure $248.5 million in asset-backed securities from the Crossroads Asset Trust, 2025-A, a deal in the works from sponsor and loan originator Crossroads.
Crossroads sells notes through a structure with six tranches of class A, B, C, D and E notes, according to Moody's Ratings, which assigned ratings to the deal along with Morningstar DBRS.
The shortest-term notes have a legal final maturity date of June 22, 2026 on the notes rated P1/R1 from Moody's and DBRS. Classes A2 through D mature on Feb. 20, 2032, and the class E notes mature on Aug. 20, 2032. The deal has a funding period of at least 90-days. The funding period could also end if there is a default event, or when the prefunding account reaches $10,000 or less.
The notes will be repaid sequentially, and with subordination, a reserve account that can be replenished and overcollateralization, the notes receive greater credit enhancement over time, according to DBRS.
The most senior notes, classes A1 and A2, benefit from total initial hard credit enhancement of 28.9%, according to Moody's. Following that, classes B, C, D and E benefit from total credit enhancement levels of 21.85%, 16.15%, 9.15% and 5.00%, Moody' said.
Initial hard credit enhancement includes overcollateralization representing 4.00% of the pool balance, and an initial reserve count amounting to 1.00% of the pool, Moody's said. Long-haul, vocational and local equipment represent 77.9%, 11.3% and 5.8% o the pool, respectively.
New equipment represents most of the pool, albeit a slight majority, at 53%. The pool is very fragmented and granular, which should help mitigate risks of economic downturn, the pool according to Moody's.
Among the 2,440 contracts in the pool, the top obligor representing 0.67% of the pool, the top five accounting for 2.49%, and the top 10 accounting for 4.02%, the rating agency said. The contracts have an average balance of $93,794, with a weighted average remaining term of 48 months.
Although Crossroads is an experienced sponsor and servicer, and the pool is granular, Moody's did express some concern that most of the companies taking out the leases are small to mid-sized companies. Most are independent, small-fleet owner-operators.
Moody's assigned Aaa to the A2 notes; and Aa1, A1, Baa1 and Ba2 to the B, C, D and E notes. DBRS assigned ratings of AAA to the A2 notes; and AA, A, BBB and BB to the B, C, D and E tranches.
