IKB Deutsche Industriebank AG plans a rare securitization of equipment lease receivables from small and medium-sized German entities.
Moody’s Investor Service and Fitch Ratings assigned preliminary ratings to the 259 million deal, dubbed German Mittelstand Equipment Finance Compartment 2.
The capital structure features 194.7 million of Aaa’/ AAA’ rated class A notes, 12.9 million Aa2’ / AA’ rated class B notes; and 18.1 million of A2’/ A’ rated class C notes. There is also a 34 million subordinated loan that will not be rated. Credit enhancement for the class A notes is 25.4%, 20.4% for class B notes and 13.5% for the class C notes, according to the Fitch presale report.
IKB Deutsche Industriebank AG and Landensbank Badeno Wurttemberg are the lead managers on the deal.
The portfolio consists of equipment leases granted directly by IKB Leasing or through a network of equipment vendors solely to SMEs, corporates and self-employed individuals in Germany. The portfolio comprises: partially amortising contracts (65.3%), hire-purchase contracts (23.8%), contracts terminable at option of the lessee (7.6%) and fully amortising contracts (3.3%).
The pool is comprised of 8,715 equipment leases that have a weighted average remaining term of 46.2 months and weighted average seasoning of 17.8 months. None of the leases are delinquent.
IKBL acts as servicer of the leases. The transaction benefits from an appointed back-up servicer (BFS Finance GmbH). The back-up servicer, together with a liquidity reserve, satisfactorily reduces the servicer discontinuity risk. The liquidity reserve covers at least six months of SPV's costs of funding.