Post Road Equipment Finance, formerly known as Encina Equipment Finance, is preparing to sell $406.1 million in securities backed by loan and lease contracts on medium- and large-ticket equipment to corporate clients.
Post Road Equipment Finance 2025-1 is offering the notes through six tranches of class A, B, C, D and E notes, according to Kroll Bond Rating Agency. The most senior tranche has a legal final maturity date of Feb. 17, 2026, while the A2 through D notes mature on May 15, 2031, the rating agency said.
The class E notes mature on May 17, 2032, and the deal is slated to close at the end of January, according to Asset Securitization Report's deal database.
The notes benefit from credit enhancement in the form of overcollateralization, excess spread, a reserve account and subordination. Overcollateralization will represent about 8.9% of the deal's $445.7 million securitization value. Excess spread amounts to 3.5% per year, and the reserve account will be funded at an amount equal to 1.00% of the initial securitization value.
The A1 and A2 notes benefit from 29.6% in initial hard credit enhancement, KBRA said. Classes B, C, D and E benefit from enhancement levels of 25.8%, 20.1%, 16.3% and 9.9%, respectively.
KBRA says 170 contracts extended to 67 obligors make up the asset pool. On average, the contracts have an average balance of $2.6 million, with an average obligor exposure of about $6.6 million. On a weighted average (WA) basis, the contracts have a remaining contract term of 45 months, with a WA yield of about 10.4%.
While the credit enhancement scheme is an outright credit positive for the deal, the obligors' non-investment grade credit quality could present challenges to the timely repayment of notes. Yet the sponsor found a way around this too.
"PREF focuses primarily on obligors with revenues in excess of $250 million backed by private equity sponsors," KBRA said.
Manufacturing equipment accounts for the largest proportion of equipment types by far, representing 33.4% of the pool's securitization value, KBRA said. Computer hardware followed, with 10.1%. The top five obligors represent 21.5% of the pool's securitization value.
KBRA assigns K1+ to the A1 notes; AAA to the A2 notes; AA+ to the class B notes; A+ to the class C notes; BBB+ to the class D notes and BB+ to the class E notes.
