Loans and leases on large-ticket equipment will secure $868 million in asset-backed securities expected from MassMutual Asset Finance, selling notes through the Barings Equipment Finance, 2025-A.
The transaction will sell the 2025-A notes through five rated tranches of class A and B notes, according to Fitch Ratings, Moody's Ratings and Kroll Bond Rating Agency. The deal comes to market with more diversification by top industry and obligor concentration, although the obligors have a slightly weaker credit quality than those in the Barings Equipment 2024-A deal.
All the class A notes benefit from initial hard credit enhancement representing 8.0% of the initial pool balance. Classes A1, A2, A3, A4 and B mature on Feb. 13, 2026, Oct. 13, 2028, Aug. 13, 2032, and June 13, 2050 for both classes A4 and B, respectively.
J.P. Morgan Securities and Wells Fargo Securities are lead underwriters, along with Bank of America Securities and Société Générale Americas Securities, according to rating agencies.
The deal has several important credit strengths, including that MassMutual has a strong managed portfolio, with Moody's pointing out that since 2009 the portfolio has had almost zero net losses. On a weighted average (WA) basis, the supporting leases and loans have a rating factor of 600, which equals a Baa3 credit score, Moody's Ratings said.
KBRA notes that commercial obligors with an investment grade rating make up 76% of MassMutual's customer base. Within that group, payments from the U.S. government account for 14.4%, the largest concentration, according to KBRA. The payments were to energy companies or private contractors for energy efficiency installations.
The deal will follow a full turbo repayment structure, where all available collections will be used to pay down principal, increases hard credit enhancement as a percentage of the current pool balance, according to KBRA.
Credit enhancement includes a non-amortizing reserve account equal to 0.50% of the deal's initial aggregate securitization value (ASV). Notes also benefit from 1.01% in excess spread, and subordination.
KBRA assigns K1+ to the A1 notes; AAA to the A2 through A4 notes; and AA to the class B notes. Moody's assigns P1 to the A1 notes; and Aaa to the A2 through A4 notes. Fitch assigns F1+ to the A1 notes; and AAA to the A2 through A4 notes.
