Verdant Commercial Capital has sponsored its first term securitization, a $264.8 million deal whose bonds are secured by revenue from loans and leases on new and used equipment.
Transportation equipment accounts for half of the collateral on the loan and lease contracts, with materials handling and recreation accounting for another 26.2% of the portfolio, according to ratings analysts from Moody's Investors Service.
A non-declining reserve amounting to 1.0% of the initial pool balance, will provide some credit enhancement to the notes. Further enhancement comes from, an initial overcollateralization of 5.3% of the starting pool balance—which will build to 9.5% of the outstanding pool balance. This will also have a floor of 1% of the pool balance, according to Moody's. A cash reserve account will also provide liquidity to the pool, the rating agency said.
Wells Fargo is lead underwriter on the transaction, according to Moody's, with U.S. Bank Trust acting as the indenture trustee, the rating agency said.
Verdant has several strengths, Moody's said. While Verdant will service the loans underpinning the bonds, GreatAmerica Portfolio Services Group is on the deal as primary servicer of the portfolio other than late-stage delinquent contracts. GreatAmerica is an independent third party company, with 12 years of experience in backup and successor servicing, lending more confidence, as far as Moody's sees it. It has also been named the transaction's hot backup servicer.
The collateral pool is very diverse by industry and equipment type, which is another plus, says Moody's. Such security for the leases and loans include tow trucks (16.4%), material handling equipment (14.5%), courier and local freight (13.7%), golf and related equipment (11.7%), trailers (7.5%) and vocational equipment (6.3%).
Geographically, the pool is a little less diverse, with 27.7% of the loans being located in California. After that the pool is much more diverse, with Texas and New York following with 7.3% and 7.0% of the pool, according to the rating agency.
Moody's assigns 'P-1' ratings to the A-1 notes; 'Aaa' to the A-2 notes; 'Aa2' to the class B notes; 'A1' to the class C notes and 'Baa2' to the class D notes.
