Capital Corp. is currently shopping its first term ABS transaction backed primarily by small ticket equipment leases, and originated through GE's vendor relationships rather than through GE's own financing operations.
Deutsche Bank Securities and Banc of America Securities are jointly leading the $472.2 million GE Commercial Equipment Financing LLC Series 2004-1 transaction. This marks the first time BofA has participated as a lead on a GE equipment deal.
While most of the leases in the pool fall into the small ticket class - averaging roughly $20,000 - there is a smattering of midticket leases, which are generally around $120,000, in the mix, a ratings analyst at Moody's Ratings Service said. The pool is comprised of loans and leases originated by two divisions of GE Commercial Equipment Finance; Vendor Financial Services and Healthcare Financial Services. VFS-originated collateral accounts for 82% of the pool, according to a Moody's presale report.
Historical performance on both the VFS and HFS portfolios has been stable. Delinquencies have not exceeded 4.78% for VFS during the past four years, and have ranged from 1.55% to 4.74% for HFS during the same time frame.
The trust will issue four classes of senior notes representing 90% of the initial collateral pool balance, which are supported by one single-A rated subordinate note for the remaining 10%. Credit enhancement levels in the form of overcollateralization and excess spread are typical of equipment transactions, a Moody's analyst said.
The pool is comprised of 15,618 loans and leases with an average principal balance of roughly $30, 252. The maximum contract size is $3.08 million. Industries represented in the pool include services (37.6%), healthcare (21.38%), mining and construction (13.08%), and printing and publishing (6.59%). The underlying equipment consists of office (38.87%), construction (18.11%), medical and dental (16.37%), industrial (7.68%) and technology and communications equipment (7.53%).
The largest obligor represents roughly 1.32% of the pool balance, and the top 10 obligors account for 7.54%.
Sources anticipate that GECC will be bringing two equipment deals annually going forward. The company debuted in the equipment sector with a $377 million transaction in October 2003. The financing company's previous equipment transaction priced in early November to strong investor demand. The triple-A rated A2 notes with a two-year average life cleared at two basis points over one-month Libor relative to guidance at three points over Libor.
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