Echoing an equipment-finance securitization from earlier this year, Dell Inc. has launched a $1.21 billion asset-backed security deal that overcomes concentration risk early in the repayment schedule by providing investors with highly rated securities.
The six-tranche Dell Equipment Finance Trust 2021-2 (DEFT) transaction will be backed by commercial leases and loans that are underwritten by Dell Financial Services (DFS). The collateral includes mostly Dell Technologies and Dell EMC branded equipment, according to a September 9 pre-sale report from Fitch Ratings.
TD Securities is the lead manager on the transaction, while Dell Financial Services is acting as servicer and sponsor.
In terms of risk concentration, Fitch notes that the deal’s largest obligor, top 10 obligors and top 20 obligors represent 4.9%, 29.4% and 41.2% of the transaction, respectively. It adds that these levels are notably lower compared to its last transaction in 2020, priced last September, but in line with its first 2021 deal priced in March and other recent DEFT transactions. The collateral pool includes 5,410 contracts.
The rating agency says that the obligor concentrations in DFS-issued ABS are unique compared to other equipment-finance securitizations, although outside the top 20 obligors the pool it is generally in line with traditional small-ticket deals. In addition, those top obligors are investment-grade (IG) or IG-like companies, and the top 10 are all rated the equivalent of BBB+ or higher by a nationally recognized rating agency.
“Given the high credit quality of the pool, Fitch believes credit to the IG-rated portion is warranted,” the pre-sale report says.
The deals is divided into three A Class portions, comprising a $358 million short-term piece maturing in a year and rated F1, as well as $471 million and $271 million tranches rated AAA that mature in December 2026, when a $35 million Class B portion rated AA and a $41 million Class C piece rated single-A also mature. A $38 million Class D portion rated BBB matures in June 2027.
The $1.22 billion DEFT deal earlier this year was structured almost identically. Bank of America was the structuring agent, and Mitsubishi UFH Financial Group, Mizuho Securities and Société Générale were joint leads. DFS has issued 13 DEFT transactions prior to the current one since 2014.
