Dell Financial Services is sponsoring the Dell Equipment Finance Trust, 2023-1, which will raise $1.1 billion in asset-backed securities, backed by fixed-rate true leases, finance lease and loans and long-term trade credits on a portfolio of business-critical technology equipment.
The pool is of high credit quality, the financings have low remaining terms and the transaction has a strong structure, all overseen by an experienced servicer, Dell Financial Services itself, and all considered credit strengths, according to a pre-sale report from Moody's Investors Service.
Bank of America Merrill Lynch is the manager on the deal, which is slated to close on March 22, according to the Asset Securitization Report's deal database. The transaction will issue notes through a senior-subordinate structure, and those notes will receive support from a reserve account amounting to 1.00% of the aggregate discounted contract balance; overcollateralization and excess spread of 2.82%.
About 10,704 contracts will secure the deal, according to Fitch Ratings, which also expects to assign ratings to the notes. Among the obligors who hold those contracts, the services industry represents the largest portion of the portfolio, at 41.68%. Manufacturing follows, at 17.97%, then finance, insurance and real estate at 14.13%, transportation, communications and public utilities, at 10.18% and public administration rounds out the top five industries, with 6.01%.
Moody's notes that obligors that are large enterprises or public institutions make up 82% of the discounted receivables balance. It's a credit positive because those segments have incurred very low losses in Dell's portfolios, historically, the rating agency said.
As for the pool's breakdown by financing type, true leases make up 36.63% of the pool, then finance leases (31.40%) and loans (31.96%).
Moody's expects to assign ratings of 'P-1' to the most senior notes; then 'Aaa' to the A-2 and A-3 notes; then 'Aa2', 'Aa3' and 'A2' to the B, C and D notes. Fitch says it expects to assign F1+ to the A-1 notes; 'AAA' to the A-2 and A-3 notes; and 'AA', 'A' and 'BBB' to the B, C and D notes.
