Wheels Fleet Lease Funding 1, Series 2022-1, is preparing to issue about $500 million in asset-backed securities (ABS), a rule 144A transaction that is expected to close on March 11.
Underpinning the notes are two special units of beneficial interest in leases owned by an origination trust, the issuer’s rights under any letters of credit covering excess concentrations, the collection account and all money on deposit from time to time; plus an incremental reserve account and a yield supplement account, according to a pre-sale report from Morningstar | DBRS.
The deal is structured to issue notes through a subordinate structure, which is also a factor in its credit enhancement. All of the notes have initial credit enhancement and subordination levels and cash reserves. Class A, for instance, has a credit enhancement level of 13.0%, a subordination level of 9.0%–as a percentage of the required asset amount–and an initial cash reserve of 0.73%. The credit enhancement levels vary until the class E notes have an initial credit enhancement level of 4.0%, overcollateralization of 3.28%, and a cash reserve of 0.73%.
DBRS expects to assign ‘AAA’ ratings to the $453.5 million, class A notes. After that, the rating agency expects to assign ‘AA’ on the $14.2 million class B notes and ‘A’ on the $20.2 million, class C notes.
Wheels LT and Doblen Trust are the origination trusts, while Wheels, LLC and Donlen LLC will act as servicers.
DBRS noted that the coronavirus pandemic has had an adverse effect on the U.S. corporate borrower in general, but the Wheels Fleet Lease Funding, 2022-1, is expected to remain resilient.
“Diverse groups of corporate obligors are making lease payments as well as covering shortfalls in book value at lease end,” DBRS said. “”Furthermore, as auto fleets are typically essentially to a company’s operations, leases are likely to be affirmed in case of insolvency.”
