OWN Equipment Fund II is preparing to issue $227.7 million in asset-backed securities (ABS) backed by revenue from leases on rental equipment that it owns and that EquipmentShare.com (EQS) both leases and manages.
EQS manages the equipment on short-term leases, generally 28 days or less, to construction contractors, and which can be renewed, according to ratings analysts at Morningstar DBRS and Kroll Bond Rating Agency. Under the lease agreement between EQS and the issuer, EQS and the equipment owner split the rental revenue, according to DBRS.
The deal, a master trust, will issue notes through class A, B and C notes, which all have a Sept. 26, 2033 legal final maturity date. Citigroup Global Markets is structuring agent on the deal, which is slated to close on June 25.
Overcollateralization, subordination and a reserve account provide credit enhancement to the notes, DBRS said. Initially, the reserve account will be funded to an amount equal to about $5.7 million, or 2.08% of the deal's Aggregate Portfolio Value (APV). As the notes pay down the reserve account will decrease, but it is required to maintain a balance equaling four months of interest and senior fees.
OWN Equipment Fund has nine different equipment types that make up 96.39% of the pool's Net Orderly Liquidation Value (NOLV), according to KBRA. Telehandlers, telescopic boom lifts, and scissor lifts represent 36.60%, 24.60% and 12.28%. The top five equipment types in the pool, in aggregate, represent about 85.98% of the deal's NOLV.
Among manufacturers, ten different companies account for 85.51% of NOLV, KBRA said.
DBRS assigns A, BBB and BB to classes A, B and C. KBRA, meanwhile, assigns A, BBB- and BB- to classes A, B and C.
