As many as four shipping container securitizations are in the pipeline for this year.
According to market sources, ABN Amro is close to bringing a $75 million deal for Gold Container Corp., which should close by the end of this month.
Gold Container is the U.S. subsidiary of The Touax Group, a France-based container and railcar-leasing corporation. The deal will be offered in two parts - a senior and a subordinate tranche - with a combined value in excess of $75 million.
Financial Security Assurance is rumored to be wrapping the deal, although FSA would only confirm that it is looking at the asset class. ABN also declined to comment.
Textainer and Interpool, both of which are U.S.-headquartered companies, are also scheduled to bring deals this year. Textainer's deal should hit the market sometime before summer. Further details were unavailable.
Though not technically a shipping container deal, Interpool will securitize the lease-streams associated with shipping chassises, or the chassises that shipping containers are set onto off-loaded from the freightliners.
Interpool closed a $280 million warehouse facility with a lender last July, which will be taken to the term market.
One source said that Triton Containers, which hit the market with a $300 million container deal last fall, could be back in the market before the end of the year. Triton's 2000 deal was associated with the revenue streams derived from approximately 200,000 containers.
First Union was the lead manager on Triton, and had provided the company with a warehouse facility prior to securitization. MBIA wrapped the deal.
According to FU, the bank is currently working on at least two container transactions, though the bank would not name the issuers. One shipping container industry executive said that, between financing these companies and underwriting their deals, First Union is involved in 90% of the industry's transactions.
"It's an industry that we have been very familiar with, both from a lending perspective and a structured finance perspective, for about 15 years," said Leah Torstrick, a director at First Union.
MBIA classifies shipping containers as operating assets, in line with railcars, and chassis. Currently MBIA is working on a railcar deal and a chassis deal, presumably Interpool, though MBIA would not confirm it.
Apart from Triton, MBIA has played a role in a number of private operating asset transactions, and continues pursuing the shipping containers.
"One of the things we like about the container industry is that, with the research we've done since 1995, we feel that we understand the drivers in it," said Lorraine Barg, a vice president at MBIA.
According to Barg, marine cargo containers represent a worldwide investment of more than $30 billion, not including the billions that are invested in higher-capacity ships, or the countries that are re-dredging ports to accommodate them.
"We take comfort from the fact that there's too much money wrapped up in the industry for anything in the near future - and by that I mean 20 to 30 years - to happen in this industry that would threaten MBIA's investment," Barg said. "Everybody has too much invested in it. They can't afford for there to be a complete change in the way goods are shipped around the world."
Some of the container leasing companies finance themselves through the asset-backed commercial paper market on a wrapped basis, a rating agency source said.
The deals are considered hard asset securitizations, in that there is very little correlation between the book value of the assets and the cashflow coming off the leases.
"In a normal leasing deal, you'd simply present value the stream of lease cashflows over the life of the leases, and that's what you'd lend against," Barg said. "With these deals, you have to re-lease the containers over the life of the deal in order to generate sufficient cashflow, and that's where the uncertainty comes in. So what do you lend against? You lend against the hard asset value, and you take comfort from the operating company's historical success in releasing."
Because of this, the deals are equipped with their share of servicer risk, in that the servicer must continually mine the cashflows. From a rating agency perspective, it's difficult to remove the corporate credit from the rating on the deal.
A challenge for these companies is that the flow of import into the United States is far greater than the export. Most of the containers are built and shipped out of Asia, and, as the containers cost between $800 and $1500, it can be cheaper to buy them new than to ship them empty. Moreover, there can sometimes be a storage fee associated with a container between leases.
Interestingly, there's a decent used market for shipping containers. Once the containers live out their useful "marine life," there is a market of interested parties including construction companies (for dumpsters or bins) and supermarkets (for temporary inventory storage).
Further, there is a definable bottom end to the resale value, because the containers, typically weighing in the two ton range, can always be melted and sold as raw steel.
