Merchants Fleet Funding is sponsoring a $500 million securitization of revenues from 49,897 vehicle leases.
This is the sponsor's first deal in 2025, and it follows a pattern of issuing one deal a year since 2023, according to the Asset Securitization Report's deal database.
Moodys Ratings says the deal is slated to close on December 16, and all tranches of notes have the same legal final maturity date, January 2039.
The class A tranche contains the bulk of outstanding notes in the deal, $409.2 million, according to Moody's Ratings and Morningstar DBRS, which assessed the notes.
Merchant's notes have several key credit strengths, including that vehicle fleet lease securitization pools have had very low delinquencies and losses historically. Also, most of the contracts are open-end leases. The lessee bears the related vehicles' residual value risk as the leases mature. Also, the securitization deal will only be exposed to residual value risk of open-end leases in case of a lessee default.
Structured as a master trust, Merchant Fleet has about $1.3 billion in collateral supporting the forthcoming deal and the series of notes issued previously. There is a 12-month revolving period when assets that meet certain conditions can be added to the portfolio, according to DBRS.
Class A notes benefit from credit enhancement equaling 22.46%, and is composed of subordination (17.42%), overcollateralization (4.09%) and an initial cash reserve (0.96%).
DBRS assigns ratings ranging from (P) AAA (sf) on the class A notes to (P) BB (sf) on the class E notes. Moody's assigns AAA, Aa1 and A1 to classes A, B and C.
