Stonebriar Commercial Finance and its Canadian subsidiary are preparing to sponsor a $806.9 million securitization of revenue from various contracts on assembly equipment, marine assets and other industry related equipment, in a deal where the assets have a higher concentration of loan assets and more seasoning than assets in the previous deal.
SCF Equipment Leasing and SCF Equipment Leasing Canada, 2024-1, will issue the notes to investors and repay them from 10 tranches of classes A through G notes, according to a presale report's description from Moody's Ratings. The class A notes benefit from total hard credit enhancement equal to about 31.50% of the portfolio balance, according to Moody's.
The rest of the capital structure benefits from enhancement levels ranging from 23.75% on the class B notes to 2.00% on the class G notes. Legal final maturity dates range from July 3, 2025 to Dec. 20, 2034, the rating agency said. Stonebriar's management team experience—from its 25 years in the business, mostly in the middle market and commercial equipment lending—and strong historical performance.
Other forms of enhancement include overcollateralization, a fully funded reserve account of 1.00% of the initial pool balance, and excess spread.
SCF Equipment's collateral diversification is another strong credit characteristic, according to Moody's. Loans, leases, participations and membership units of interest make up the portfolio of contracts in the deal. Manufacturing equipment, chemical plant, sand planet, rail, and renewable diesel refinery account for 23.1%, 11.0%, 10.4%, 9.9% and 7.8%, of the portfolio, respectively, aside from refunded contracts.
Yet the deal has several credit vulnerabilities, including that only five obligors, representing 7.2% of the pool, are rated investment grade. Fifty-two contracts are in the pool, with 34 unique obligors. Further, the current asset pool is more concentrated on the top obligor (11.0%), the top five obligors (42.2%) and the top 10 obligors (64.3%) than the prior transaction, the rating agency said.
Also 31.1% of the contracts in the pool ate loan/lease participation agreements, and membership unit interests represent an additional 29.3% of the pool, Moody's said.
Moody's assigns ratings of P! to the A1 notes; Aaa to the A2 and A3 notes; Aa2 on the class B notes; A2 on the class C notes; Baa3 on the class D notes; and Ba3 and B3 to classes E and F, respectively.
