SCF Equipment Leasing, an equipment lessor that has been in business for just three years, is tapping the securitization market for funding.
The collateral consists of 71 contracts to 43 obligors. The average contract is approximately $8.4 million and the average exposure to an obligor is approximately $13.9 million. The maximum exposure to an obligor is approximately $119.6 million or approximately 20.0% of the ADB. The securitization is based on the projected equipment loan and lease cash flows discounted at a blended rate of 9.12%.
To date, SCF has obtained funding from affiliates of Eldridge and Security Benefit Life Insurance, a life insurance company based in Topeka, Kan., with more than $30 billion in total assets under management.
The pool of assets being securitized has an aggregate discounted balance approximately $598.5 million, representing roughly a quarter of the loans and leases SCF has funded to date, according to Kroll Bond Rating Agency.
Kroll expects to assign an AAA to two tranches of senior notes to be issued in the transaction: $135.3 million of notes due April 20, 2021, and $202.9 million of notes due Oct. 20, 2024. There are also five tranches of subordinate notes with ratings ranging from AA to B and a single unrated tranche of notes.
Credit Suisse Securities (USA) LLC Goldman, Sachs & Co. LLC Merrill Lynch, Pierce, Fenner & Smith Incorporated are the initial purchasers.
Also, the portfolio contains two loans to an aircraft lessor, where the underlying collateral are two Boeing 777- 200LR passenger aircraft each with two GE90-110B1L engines. Moreover, SCF is a co-lender in the transaction with another financial institution. The company’s debt is pro rata and pari passu with the other lender. However, SCF’s tranche requires interest-only payments with a bullet payment at maturity while the other lender’s tranche is fully amortizing. Moreover, to the extent there is a default prior to the other lender being repaid in full, the company does not enjoy the typical and standard rights of a secured lender as such rights are shared with the other lender.
As of March 31, SCF had funded approximately $2.4 billion equipment loans and leases and had a net investment of approximately $1.8 billion.
