Trinity Industries Inc. priced its first-ever railcar lease securitization last week, a $177 million series 2003-1 transaction through the sole lead of Credit Suisse First Boston. Offered in the 144A market, the fixed-rate single-tranche offering, with an 11-year average life, priced to yield 80 basis points over interpolated swaps (see deal terms in scorecards p.38).

In an environment when infrequent issuers of off-the-run assets, sporting below investment-grade ratings, come under heavy investor scrutiny, this offering went surprisingly well. This was thanks in part to a full Ambac surety wrap. Parent company and seller/servicer Trinity Industries is rated Ba2' by Moody's Investors Service and BB' by Standard & Poor's.

While this is the inaugural equipment lease securitization, Trinity has sold an EETC, named Trinity Industries Leasing Company Equipment Trust Certificates. Additionally, railcar lease payments have been securitized, most recently by GATX unit General American Railcar Corp., which has sold three such deals from 1997 through 1999, totaling $394.8 million.

The lease portfolio consists of 57 leases for 4,446 different railcars, according to a Moody's presale report. Of the total, 2,391 are tank cars with the remaining 2,055 being the more standard freight variety. Of the 57 leases, 24 (45.3%) are to investment-rate rated lessees.

Although the specific lease obligors could not be disclosed, the typical lessee was described as being an industrial company that would need to transport its product over long distances, such as auto manufacturers, agricultural concerns, oil and/or coal companies and chemical companies.

There is an average of 9.7 years remaining on the leases being securitized, with an average 1.6 years of seasoning per lease. The largest lessee accounts for 9.11% of the trust portfolio, with the top five accounting for 25% of the trust. One-hundred percent of the railcars are being used. When fully funded, the account can be used for most shortfalls, including equity returns.

In addition to the Ambac surety, there are a number of structural enhancements in Trinity 2003-1. A reserve account, initially funded to $11 million, will trap an additional $9 million, should any one of the following criteria not be met. A revenue-to-expense ratio of 1.15 to 1 must be maintained and Trinity's senior unsecured rating must remain above the single-B area. Also, there are utilization rate and average lease ratetriggers on Trinity's total managedfleet.

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