Enterprise Rent a Car is tapping the securitization market for $750.2 million to finance fleets of cars and trucks that it rents to companies.
The deal, Enterprise Fleet Financing, LLC, Series 2017-1 will issue three classes of notes with preliminary ratings from Fitch Ratings: $197 million of money market notes is rated F1+ and two tranches of notes maturing in July 2022 totaling $553.2 million are rated AAA.
Initial hard credit enhancement of 8.63% for the all three tranches is virtually unchanged from recent transactions, according to Fitch.
The notes are backed by payments on am $812 million pool open-end and closed-end leases on cars, light-duty trucks and other vehicles originated and serviced by Enterprise Fleet Management.
It’s the sponsor’s 13th term securitization offered in the U.S. under Rule 144A of the Securities Act of 1933. Proceeds from the transaction will be used for general funding purposes.
Among the primary ratings considerations for Fitch is the fact that obligor and industry concentrations are minimal. The single most concentrated obligor represents 0.66% of the pool, while the top industry, construction, represents only 7.40% of the pool.
Exposure to the oil and gas industry, which is experiencing a prolonged state of decline, is just 5.3%, well below the platform’s historical range of 7%–16%.
Concurrently, trucks have become a larger part of the pool as the sponsor’s fleet has shifted; Fitch thinks that this could be a positive, since low fuel prices have boosted the resale value of trucks.
Another positive: aproximately 97.4% of the 2017-1 leases are open-end leases, meaning the lessees bear the residual risk. The remaining 2.6% of the leases are closed-end, under which the trust will bear the wholesale market risk.
Bank of America Merrill Lynch is the lead structuring agent.