Lease contracts on railcars will act as collateral for the GBX Leasing 2022-1 LLC, which will issue multiple series of notes beginning with Series 2022-1. That transaction is preparing to issue $323.2 million in asset-backed securities.
Wells Fargo Securities is sole structuring agent, and is acting as joint bookrunner with BofA Securities on the deal, for which a closing date has yet to be determined. U.S. Bank Trust Company National Association will serve as trustee, note registrar, paying agent and account collateral agent on the deal, according to a presale report from Kroll Bond Rating Agency.
Series 2022-1 will issue two classes of notes to bondholders, and KBRA expects to assign ratings of ‘A’ on the $302 million class, and ‘BBB’ on the $20.7 million notes. A portfolio of 3,363 freight rail cars, with an aggregate average appraised value of $262.4 million, plus 1,126 tank railcars with an aggregate appraised value of $150.3 million, will secure the notes, KBRA said.
In terms of the lease types, KBRA noted that in Series 2022-1:
• full-service leases account for 43%
• per diem leases account for 16.2%
• net leases account for 34.8% of leases
For railcars that are subject to full-service and per diem lease contracts, the issuer will be responsible for maintenance costs. Indeed, Greenbrier Management Services, which is a wholly owned subsidiary of The Greenbrier Companies, will act as the insurance manager and servicer of the notes. KBRA counts this as a credit positive, since it is one of the leading companies in that industry.
The Series 2022-1 is under the structure of a master trust, and the issuer can issue additional series of notes. Class A notes will amortize to a loan-to-value ratio of about 71.0%, in about seven years.
In terms of structural protections to the noteholders, Series 2022-1 includes credit enhancement in the form of overcollateralization and a liquidity reserve account, plus performance triggers.
When the utilization rate of the railcars becomes less than 80%, or the Debt Service Coverage Ratio is less than 1.05, an early amortization is triggered, according to KBRA.
In a feature that might have mixed Series 2022-1 does not limit the amount of permitted dispositions throughout the life of the transaction, KBRA said.
“While removing this feature allows the Servicer to take advantage of market opportunities otherwise restricted by disposition limits,” KBRA said, “it also creates the potential for the collateral pool to migrate to a weaker composition.”
