Island CEF, a subsidiary of Gordon Brothers Holdings is preparing its first securitization and hopes to sell investors $265.5 million in bonds secured by revenue from equipment finance leases and loans.
Notes from Gordon Brothers Equipment Finance, 2026-1, will be sold through five tranches of class A, B, C and D notes. Classes A1 and A2 will have maturity dates of July 20, 2027 and June 20, 2034, respectively, according to analysts at Morningstar DBRS. The remaining B, C and D tranches will mature on June 20, 2034.
Slated for a July 29 close, according to Morningstar, the notes carry a cumulative net loss assumption of 3.65%, reflecting the credit metrics of the underlying assets and how comparable equipment lessor portfolios have performed, DBRS said.
The 144A transaction has a capital structure with subordination, overcollateralization, cash held in a reserve account, and excess spread, the rating agency said. Initial overcollateralization represents 5.80% of the aggregate securitization value as of the initial cut-off date, with a target of 7.65% of the deal's aggregate securitization value as of the initial cut-off date, May 31, 2026.
A non-amortizing, replenishable cash reserve account representing 1.00% of the pool balance will help boost credit to the notes.
As of the cutoff date, the weighted average (WA) yield on the collateral pool was about 9.43%, giving the transaction excess spread of about 3.0%, the rating agency said.
DBRS noted that the obligor concentrations in the underlying portfolio is somewhat elevated. The top 20 obligors account for 32.0% of the aggregate securitization value, while the top 10 represent 18.8%, the rating agency said.
Construction; wood, printing and chemical manufacturing; administrative and support services; long-distance trucking; and metal, machinery, transportation and furniture manufacturing account for 21.1%, 12.3%, 10.4%, 8.4% and 7.3% of the pool, respectively.
DBRS assigns ratings ranging from (P) R-1 (high) (SF) on the A1 tranche to (P) BBB (sf) on the class D notes.
