A startup railcar leasing firm is making its inaugural push into the asset-backed securities market.
InstarGroup LLC, which launched in 2016 in partnership with a private equity partner, has launched a $267.45 million debut securitization of railcar leases involving 3,138 tank and freight railcars that InStar leases to firms across multiple commodities and shipping industries.
InStar 2021-1 is secured by client lease payments as well as the $322.23 million aggregate appraised portfolio value of the railcars, none of which are off lease.
The assets will back three classes of notes, including a $238.45 million Class A tranche with a preliminary A rating from Kroll Bond Rating Agency.
.The pool consists predominantly of full-service leases (80.9% by unit), but 17.6% are net lease contracts in which the lessee takes responsibility for maintenance, taxes and expenses of the units. Another 1.5% of the pool were per diem leases.
Approximately 31% of the railcars are leased to obligors in the natural gas liquids (NGL) (11%), crude oil (10.5%) and steel/iron (9.5%) sectors.
The railcars included in the transaction have an average age of 8.8 years, although a majority (2,204) were built in the past five years, including 780 alone in 2019. The average remaining terms on leases in 3.3 years.
The pool represents more than half of the 6,400 railcars that InStar has acquired in the past four years for its managed portfolio.
The transaction is the second rail-car securitization for 2021, following the $407 million
Railcar transactions slowed in 2020 following a post-crisis record $1.855 billion across four transactions in 2019.
InStar was started in 2016 in partnership with Sightway Capital, a private investment group within hedge fund Two Sigma Company.
Credit Suisse is the sole structuring agent and joint bookrunner for the deal.
