What global trade war?
Even as the White House threatens to impose tariffs on an estimated 4% of goods imported to the U.S., Textainer Group Holdings is marketing its first offering of the year of bonds backed by marine cargo container leases. The $259.1 million deal is the sixth of its kind this year, as containers remain in high demand by shipping firms.
The offering through the Textainer Marine Containers VII trust consists of two tranches of notes: a $250 million Class A tranche and $9.1 million in Class B tranche. The Class A notes carry a single-A rating that S&P Global Ratings usually assigns to container-lease deals.
The notes are backed by portfolio of 71,232 leases with an approximate net book value of $303.7 million. In addition to lease receivables, investors will be entitled to any cash flow from the sale of containers during the deal's estimated seven-year lifespan.
S&P says the deal benefits from “relative stable” utilization rates across the industry as a result of a stable supply of ships. The healthy demand is aided by the rising costs of container manufacturing in recent years that have drawn cargo shipping firms to handle excess capacity by leasing, rather than adding to their own holdings of containers. (Textainer reported a tight inventory of used containers in the market during the first quarter due to high utilization rates.)
Shipping lessees like Textainer have also reduced capital spending, avoiding a potential glut in container supply if a downturn in demand occurs, according to S&P.
Textainer is further shielding the deal from a downturn by pooling a younger-than-average container fleet that averages 1.5 years, along with longer-term leases with a weighted average remaining term of 6.5 years – longer than most other lease transactions that reduces the risk of having to re-lease the containers during the life of the issuance.
But investors in turn must cope with a deal with a lower average annual amortization (7.2%) and a longer-than-usual weighted-average list test, which doesn’t impose a cash-flow sweep trigger before 11.5 years, according to S&P. Textainer also includes a high concentration of dry containers in the 2018-1 series that is more vulnerable to cyclical demand.
Textainer’s deal will push ship-container lease securitization volume to nearly $1.9 billion this year in a new asset-backed offerings, pacing ahead of 2017 when eight deals totaling $2.77 billion were issued. Among the deals this year are two from the industry’s largest lessor, Triton Container Intl., as well portfolios of leases pooled by SeaCube Container Leasing, CAI Intl. and Seaco Global.
Textainer (NYSE: TGH), along with Triton and CAI, will release second-quarter earnings through next week. The company reported a fifth consecutive quarter of revenue growth and a 15% growth in adjusted net income ($2.2 million) in the first quarter, which it said is typically the industry’s weakest quarter.
