The USQ Rail II LLC, Series 2021-3 is preparing a $252.6 million securitization of lease payments on 3,203 tank rail cars.
Also known as STEAM 2021-3, the deal has been put together as a master trust, and has two issuers, the U.S. issuer USQ Rail II LLC and USQ Canada Rail II ULC, the Canadian Issuer.
The collateral pool consists of 1,961 tank cars and 1,062 freight cars, with a total adjusted value of about $323.9 million. When broken down by product type that the cars contain, agricultural products accounts for about 24.7 percent of the portfolio, liquefied petroleum gas represents 21.7 percent and petrochemicals and other chemicals accounts for 12.9 percent. Crude oil accounted for 9.4 percent.
The deal’s notes are on a rapid amortization schedule, with a legal maturity of June 2051, according to a preliminary assessment from Kroll Bond Rating Agency.
In a positive credit attribute, the structure has an early amortization provision, with a date of June 2027. As of March 31, 2021, about 99.5 percent of the railcars are on full service leases, wherein the lessor is responsible for maintaining and servicing the railcars, administering and paying taxes and providing ancillary services to the lessee.
Credit Suisse Securities is acting as the sole structuring agent and lead bookrunner, according to KBRA.
The average age of the portfolio railcars is 5.3 years, with 2015 accounting for the years with the highest number of railcars, 1,040, while the weighted remaining term of the leases is 3.2 years. In the case of the latter, more than 800 cars have a remaining lease term of two years.
In terms of the environmental, governance and governance elements of the deal, railcars are considered one of the more environmentally friendly modes of freight transportation, according to KBRA. Environmental Protection Agency data show that freight railroads account for 0.6 percent of all greenhouse gas emissions and 2.1 percent of sources related to transportation sources.
