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GreatAmerica lowers credit enhancement on equipment ABS (again)

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GreatAmerica Leasing trimmed credit enhancement for its latest securitization of small-ticket commercial equipment leases and loans, as it has in the previous three transactions.

The $542.97 million transaction, GreatAmerica Leasing Receivables Funding 2018-1, will issue a money market tranche and three term tranches with a preliminary AAA rating from Fitch Ratings that mature in May 2020, June 2020 and June 2024.

All four senior tranches benefit from initial hard credit enhancement of12%, which is down from 12.25% on the senior tranches of the 2017-1 deal, 12.30% for 2016-1 and 12.90% in 2015-1.

Credit enhancement on an a AA-rated tranche maturing in June 2024 was also trimmed to 8.25% credit enhancement, down from 8.5% in 2017-1 and 2016-1 and 9.16% in 2015-1.

An A-rated tranche maturing in June 2025 has 5.75% credit enhancement, unchanged from the two prior transactions.

Wells Fargo Securities is the lead manager.

In its presale report, Fitch noted that losses on recently underwritten loans and leases in GreatAmerica’s managed portfolio (including loans that are not securitized). Nevertheless, the rating agency’s expectations for cumulative net losses are unchanged at 2.5%.

As with the February 2017 deal, the notes are backed primarily (65.2%) by copiers and printers, which have historically performed better than the other types of equipment that GreatAmerica leases, according to Fitch.

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Esoteric ABS