Fraikin Group Restructuring Its Truck Lease Securitization

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Fraikin Groupe is refinancing a truck lease securitization, according to Standard & Poor’s.

The deal, dubbed FCT Eurotruck Lease III, will issue a €400 million loan facility and €400 million of notes, all of which have a legal final maturity of 2043 and are rated BBB by Standard & Poor’s.

Fraikin Groupe is the largest long-term truck hire provider in Europe; it manages a fleet of more than 54,000 vehicles, employs about 2,850 people across Europe, and generated €644 million of revenue in 2014, according to S&P.

Until now, the company’s portfolio of truck leases was financed exclusively through a revolving credit facility denominated in euros and pounds sterling granted by Crédit Agricole Corporate and Investment Bank (CACIB). This revolver was itself refinanced through a transaction dubbed Eurotruck Lease II, which was issued in 2004 and has since been restructured several times.

Eurotruck Lease III will extend Fraikin’s funding for five additional years, increase the maximum program size to €1.2 billion from €1.0 billion, and extend the investor base.

The receivables arising under the term loan facility will be securitized through a new ETL III vehicle, which will issue term notes to fund the purchase, while RCF receivables will continue to be securitized through the existing ETL II structure.

The credit facility receivables are ultimately backed by the cash flows generated by long-term leases (rents paid by lessees, truck residual values), short-term leases (truck market values only), working capital items (work-in-progress, leases receivables, value added tax receivables), and available cash.

The new transaction has a five-year revolving period, during which the term loan facility will fund the truck lease business, subject to certain concentration limits and performance triggers, notably a borrowing base test aiming to maintain the balance between performing assets and liabilities at FA level. The term loan and term notes will only start to amortize after the revolving period ends.

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