TAL International is marketing its first container securitization of the year, according to S&P Global.
The transaction, TAL Advantage VI, Series 2017-1, is backed by a portfolio with a net book value of $355.5 million containing 86,750 containers. The trust the right to net operating income from the portfolio and any net residual cash flows from the sale of containers.
S&P expects to assign an “A” rating to a single, $281 million tranche of fixed-rate notes to be issued via the deal.
Credit Suisse is the structuring agent, initial purchase and sole bookrunner.
Among the strengths of the deal, according to S&P, approximately 91% of leases in the portfolio have long terms and so are shielded from rate reductions during a downturn.
The transaction also benefit from interest reserve account, which equals nine months' of note interest due.
Weaknesses include relatively low lease rates, compared with deals S&P rated prior to 2016, which the rating agency said reflects the downturn in the global container industry over the past two years.
The portfolio is also concentrated in a few lessees: 38.85% of containers in the pool geld by the three largest customers, whose performances may affect the issuer's revenue receipts.
And, as with any lease securitization, the default of a customer with containers located in certain countries could make it economically or legally difficult to recover the container assets.
Also, certain kinds of lease knows as “direct finance leases,” which account for 4.93% of the net book value, may be "recharacterized" as secured debt if the lessee files for bankruptcy.