Enterprise Fleet Financing is returning to the asset-backed securities (ABS) market, with a plan to issue $1 billion in notes secured by payments on a pool of open-end, and closed-end vehicle leases that Enterprise Fleet Management has originated and will service.
The deal size could increase to a total of $1.2 billion in notes, although credit enhancement on a percentage basis will remain unchanged, according to FitchRatings.
The portfolio of secured assets has a healthy level of diversification, Fitch noted in its pre-sale report. It largely comprises smaller, non-investment grade entities, unlike other fleet lease operators that cater to larger companies. The top obligor in the pool represents 1.1% of initial securitization value. Also, oil/gas services is the top industry represented in the pool, and the top five represent a total of 30.0% of securitization value.
In another major consideration, Fitch noted that the pool had low exposures to lease-end residual value risk. Of the leases underpinning the deal’s collateral, just 0.2% are closed-end, wherein the trust would bear the wholesale market risk. Otherwise, the rest of the pool is comprised of leases where the lessees bear residual risk at the end of the lease term.
RBC Capital Markets is the structuring lead, Fitch said, while U.S. Bank National Association is the indenture trustee.
The trust will issue notes from a three-tranche capital structure. Fitch expects to assign ratings of F1+ on the $242 million, A-1 notes; and ‘AAA’ on the A-2 and A-3 notes, which will issue $635 million and $123 million in notes, respectively.
The notes have an initial hard credit enhancement of 8.2%, which is marginally lower than 8.3% in Enterprise Fleet Financing, 2022-1, and generally in line with recent transactions. Fitch added that the credit enhancement will adequately support its total ‘AAA’ stressed loss expectation of 11.1%.
Some 6,209 obligors are in the collateral pool, and they have taken out 37,480 vehicle leases. The contracts have an average outstanding balance of $173,717, according to Fitch.
In terms of collateral type, light-duty trucks comprise 85.5% of the collateral type and cars, another 9.0%. Medium-duty and heavy-duty trucks represent another 5.0% and 0.3%, respectively.
In terms of geographic distribution, Texas accounts for 14.3% of the collateral, followed by California, with 10.6%. Florida, Pennsylvania and Ohio represent another 7.5%, 4.1% and 3.5% of the pool, Fitch said.
