Seaco Shopping $196M Container ABS Portfolio

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S&P Global Ratings has rated its second marine shipping container securitization of the year in a $196 million transaction backed by leases managed by Seaco SRL.

The notes to be issued in the transaction, dubbed Global SC Finance IV, have bean assigned a preliminary ‘A’ rating – similar to S&P’s assessment of a TAL International’s $355.5 million portfolio last month.

Seaco’s deal is supported by a net book value totaling $244 million for 20 kinds of specialized containers (including refrigerated units) and tanks.

Credit Suisse and Deutsche Bank are joint structuring agents and bookrunners on the deal.

Of the 61,841 units securitized in the pool, 60,657 are on lease and 1,184 are off lease. The containers are relatively new, with a weighted average age of 2.92 years.

Similar to TAL, Seaco’s portfolio consists large of long-term and direct-finance leases (90% of the pool) that help shield from rate reductions during an economic downturn, which has occurred over the past two years in the global shipping area.

Modest global trade and the bankruptcy/liquidation of Korean shipping line Hanjin stymied demand, but reduced levels of capital spending by container companies last year stabilized the supply.

That should produce a slight increase in lease rates, although not to 2010-2011 levels.

Since 2013, marine cargo lines have only “modestly” added containers to their fleets, constrained by liquidity issues. That is keeping the leased container share of the market in the 45-50% range, according to S&P.

Last year, according to Moody's Investors Service, the $4.5 billion ship container industry saw its first growth after a six-year decline in prices and lease rates toward the end of 2016.

There are concerns that Trump Administration policies could result in a slowdown in global trade, which according to Moody's, could pose added risks to existing container ABS transactions.

About 30% of Seaco’s customer contracts are tied up with three large customers, which could bring volatility in revenue receipts should one or more of the firms be impacted by a decline in trade.

This is the first securitization for Seaco since its trust issued a repack of previous asset-backed notes into a $1.24 billion Global SC Funding Two Ltd. in 2014 (rated BBB by S&P).

Seaco SRL is owned by a Chinese non-government conglomerate HNA Group and has a 14% market share in the shipping container space. It was formed in 1998 in a joint venture between then-GE Capital Corp. and Sea Containers Ltd.  

As of Dec. 31, Seaco owned and managed fleet comprised 1,588,532 units.

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