Vehicle lease contracts for a range of Enterprise rental vehicles and the cars that they finance will secure a $850.2 million issuance of asset-backed securities from the Enterprise Fleet Financing 2023-2.
The deal is scheduled to close on May 31, says S&P Global Ratings, one of the companies assessing the deal. Enterprise Fleet Management is sponsoring the transaction and will also service the notes, according to FitchRatings, whose analysts will also rate the notes.
JPMorgan Chase Bank is the structuring lead and underwriter on the deal, which has an aggregate securitization balance of $907.3 million. Some 4,896 obligors, which carry 22,397 lease contracts, are on the deal. Also, the deal's obligors have average balances of $185,323, Fitch said, while the leases themselves have an average balance of $40,512.
Among the deal's more positive credit characteristics, says Fitch, is strong diversification in the managed portfolio of Enterprise Fleet Management, the company that will also service the notes. The managed portfolio largely comprises smaller, non-investment-grade entities with only 5.81% of them being rated. This differs from other fleet lease operators that cater to larger companies, Fitch said.
The portfolio also benefits from minimal residual value risk at the end of the underlying lease terms. Of the leases, 99.15% are open-end, while the remaining 0.85% are closed-end. The amount of closed-end leases is consistent with prior pools, while proceeds from dispositions have been stable because of the Enterprise Fleet Management's conservative assumptions about depreciations.
S&P, for its part, notes that in a previous issuance—the 2023-1—open-end leases accounted for 99.08% of the pool, only slightly less than the current deal. The rating agency views this ratio as a slight credit positive because its loss assumption for open-end leases is lower than that for closed-ends.
The concentration of top five industries increased to 29.09% of the pool, up from 28.24% in the 2021-1. Meanwhile, the oil and gas industry was the top one represented in the pool, and its concentration increased by a tick to 8.98%, from 8.84%.
Another potential credit strength is that a trigger event is built into the structure, which is based on a target overcollateralization amount that builds after closing. The transaction's OC amount cannot drop below 7.75% on or after Jan. 1, 2024, Fitch said.
S&P intends to assign ratings of 'A-1+' to the A-1 notes and 'AAA' to both the A-2 and A-3 notes. Fitch, meanwhile, expects to assign ratings of 'F1+' to the class A-1 notes and 'AAA' to the A-2 and A-3 notes. The notes have legal final maturity dates of June 20, 2024 through April 22, 2030.
