The corporate auto and light-truck fleet leasing subsidiary of Hertz Corp. is packaging a $400 million notes securitization, in its first securitization in nearly a year.
Topped by a $355.6 million, triple-A rated Class A notes tranche, the Hertz Fleet Lease Funding (HFLF) LP Series 2016-1 carries similar structures to the previous issue in the 2015-1 version, with the exception of the inclusion of a split floating-/fixed-rate split of Class A notes.
HFLF 2015-1 was issued in June 2015.
The 2016-1’s capital stack includes $10.3 million in Class B notes, $9.9 million through the Class C tranche, $9.7 million in Class D and Class E for $14.5 million. The Class A notes include hard credit enhance of 14.1%, while Class B is supported by 11.6% CE. The OC is expected to be 2.56% ($10.5 million) of the collateral pool, and the supporting reserve fund will total 0.73% (or $3 million) the pool size.
Both Moody’s and bond-rating agency DBRS issued preliminary ratings for HLFL 2016-1. The Class A notes are rated ‘Aaa’ (Moody’s)/ ‘AAA’ (DBRS); the Class B ‘Aa2’/‘AA’; the Class C tranche at ‘A2’/‘A’, and the Class D at ‘Baa2’/‘BBB’.
Moody’s does not rate the Class E tranche, while DBRS assigned a provisional ‘BBB’ rating.
Moody’s reports that the “well diversified portfolio” consists of many medium to large corporate obligors with vehicle fleets ranging from 250 to 750 vehicles and high credit quality exposure: about 36% of the companies are rated investment grade by Moody’s (41% by DBRS).
While portfolio performance has been strong in Donlen’s previous ABS issues, and fleet lease ABS pools have historically experienced low losses, Donlen saw a slight rise in delinquencies in 2015. The default rate for late payments between 31-60 days rose to 1.02% in 2015, compared to 0.35% in 2014.
The Hertz Fleet Lease deal is the fourth securitization of leases originated and serviced by Northbrook, Ill.-based Donlen Corp. since Hertz Corp. bought the nation’s sixth-largest corporate fleet lessor in June 2011 for $983 million.
Donlen provides comprehensive fleet management services for corporate motor vehicle fleets across the United States for over 50 years. As of December 31, 2015, Donlen had approximately 162,000 vehicles under lease or management.