The recent uptick in the supply of equipment lease asset-backed bonds continues, as LEAF Capital Funding sponsors a $792.6 million securitization of revenue from loans, leases and true leases, through the
Light industrial and construction equipment collateralizes the pool of contracts that will repay noteholders, says a Moody's Ratings pre-sale report. The deal will issue exclusively class A notes through four tranches. The most senior tranche, A1, has a legal final maturity date of Aug. 18, 2025, while the A2 through A4 trances are expected to finally mature on Aug. 11, 2031, Moody's said.
LEAF Capital Funding is sponsoring the deal, where Atlas SP Securities, Bank of America Merrill Lynch and J.P.Morgan Securities are managers, according to Asset Securitization Report's deal database.
Yields range from 5.3% on the P1 and A1+ rated notes from Moody's and S&P Global Ratings, respectively, to 4.9% on the Aaa/AAA rated notes in the A4 tranche, the database said. All notes are benchmarked to the three-month, interpolated yield curve.
The exclusively class-A note lineup differs from the previous issuance, the series 2023-1, S&P said in its assessment. That leaves no subordination for the class A notes, while series 2023-1 benefitted from 13.2% in that type of credit enhancement, S&P analysts said. Structuring agents opted for much more overcollateralization, though, which stands at 18.0% as a percentage of the initial pool balance, a big increase from the 4.2% seen on the 2023-1 series, S&P said. Target overcollateralization is 21.0%, up from 7.0% seen on the previous deal.
Overall, total initial hard credit enhancement is 19.5% of the initial pool balance, compared with 18.9%, S&P said.
Aside from overcollateralization, Moody's said, the notes benefit from a non-declining reserve of 1.50% of the transaction's initial pool balance and a cash reserve account representing 1.5% of the initial pool balance.
For timely repayment, the notes rely on several key credit factors. Performance in LEAF Capital Funding's managed portfolio has weathered the current high-interest-rate and inflationary environments, Moody's said. Delinquencies and net losses were just 1.65% of the net invested amount as of Dec. 31, 2023, the pool's cutoff date, Moody's said.
Aside from the P1 and A1+ ratings, Moody's assigns Aaa to the A2-A4 notes and S&P assigns the same notes AAA.
