PHH Corp. is planning its first fleet lease securitization of the year, a $500 million transaction.
Moody's Investors Service has assigned provisional ratings of Aaa’ to the class A, Aa2’ to the class B, A2’ to the class C, and Baa2’ to the class D Series 2014-1 floating rate notes to be issued under PHH Corp.'s Chesapeake Funding structure.
The Series 2014-1 transaction has a one-year revolving period. According to Moody’s presale report, the collateral backing the notes consists of a special unit of beneficial interest (SUBI) in a pool of fleet leases and the related vehicles and a special unit of beneficial interest in a pool of fleet management receivables.
The majority of the leases in the pool (99%) are "open-end” leases, where the lessees, not the issuer, are responsible for residual value losses. Residual value, which is estimated at the start of the lease, is the value of a leased vehicle at the end of the scheduled lease period. Losses in auto lease deals stem from vehicle resales, where the sale price falls below the residual value of the vehicle.
As of December 26, 2013, approximately 75.77% of the pool balance is cars (18.50%) and light-duty trucks (57.27%) and 10.55% of the pool balance consists of medium-duty trucks, 6.85% of the pool balance consists of heavy-duty trucks, 4.27% of the pool balance consists of equipment and forklifts, while the remaining 2.56% of the pool balance is made up of truck trailers.
Barclays Capital, BofA Merrill Lynch, Citigroup are lead managers on the deal.