Another pool of business technology equipment leases and loans is coming to market, as the Hewlett-Packard Financial Services sponsors the $780 million, HPEFS Equipment Trust, 2023-1, due out on March 22.
J.P. Morgan Securities is lead underwriter on the deal, which will issue the notes through a senior-subordinate structure and whose issuance amount actually be smaller, at $722.3 million, according to the Asset Securitization Report's deal database.
S&P Global Ratings finds that leases and loans to small businesses accounted for 6.37% of the collateral pool, down from 8.74% in the HPEFS 2022-3 deal. S&P says this makes for a slightly better segment mix, which affected its forward-looking cumulative gross flow loss range. The current pool is different from the 2022-3 transaction in several other ways, including wider excess spread, at 1.34%, up from 1.15%.
In keeping with the deal's senior-subordinate structure, subordination for HPEFS 2023-1, classes A and B are 21.45% and 16.70%, compared with 22.75% and 18.20% on the same classes, in the 2022-3 deal, respectively.
HPEFS 2023-1 has 3,866 contracts in its collateral pool, according to Moody's. While the entire pool is comprised of technology equipment, the collateral seems fairly concentrated. The top obligor accounts for 14.05% of the pool, while the top 10 obligors account for 55.17% of the pool, the rating agency said. It is more geographically concentrated, however, as California, Virginia and Texas account for a combined plurality of 37.67%.
As for credit enhancement, HPEFS 2023-1 will benefit from a 1% reserve account, and 7.40% initial overcollateralization. A cash reserve account provides liquidity.
This seems to be the quarter for business-critical equipment ABS, as Dell Equipment Finance Trust, 2023-1 also seeks to raise $1.1 billion on its March 22 close date.
Moody' expects to assign 'P-1' top the class A-1 notes; 'Aaa' to the A-2 through class B notes; 'Aa1' to the class C notes and 'A1' to the class D notes. S&P expects to assign 'A-1+' to the class A-1 notes; 'AAA' to the A-2 and A-3 notes; 'AA' to the class B notes' 'A' to the class C notes and 'BBB' to the class D notes.
The notes have legal final maturities ranging from March 20, 2024 through Dec. 20, 2030.
