Enterprise Fleet Management is tapping the securitization market for the second time this year.
The deal, Enterprise Fleet Financing, LLC, Series 2016-2, will issue $750.2 million of notes with preliminary ratings from Fitch Ratings and Standard & Poor's: a $188 million money market tranche and two classes of triple-A rated notes maturing in February 2022, all of which benefit from 8.68% credit enhancement.
JPMorgan Securities is the underwriter.
The notes will ultimately be backed by payments on a pool of open- and closed-end vehicle fleet lease contracts for cars, light-duty trucks and other vehicles originated and serviced by Enterprise.
The percentage of leases that are closed end, meaning Enterprise bears the risk that vehicles will be worth less than expected when they come off lease, has increased to 3.6% of the pool. That’s that highest concentration that Fitch has observed since a deal Enterprise completed in early 2014, according to Fitch. Still that vast majority of leases, or 96.4%, are open-end, meaning the lessees bear the residual risk.
Among other changes from Enterprise's previous deal, completed in February 2016, exposure to the oil and gas industry, which has been in a prolonged state of decline, has fallen to 5.4%, well below the platform’s historical range of 7%–16%. Both Fitch and S&P cited this as a positive.
Fitch also noted that trucks have become a larger part of the pool, as Enterprise has shifted its fleet, taking advantage of the potential benefit from elevated truck values now that fuel prices are low.
The leases are made to a large number of obligors in a wide variety of industries. The single most concentrated obligor represents 0.70% of the pool, while the top industry, construction, represents only 7.9%.
S&P also noted in its presale report that the concentrations of vehicles in the current model year have increased while the concentration of older model years declined.