Volvo Financial Equipment's first securitization of the year will sell $677.1 million in securitized bonds from a pool of fixed-rate loans on trucking and construction equipment.
The transaction, Volvo Financial Equipment, 2025-1, will sell notes through four tranches of class A notes, with credit enhancement from 8.00% in overcollateralization, and a reserve account representing 0.75% of the pool balance at closing, according to Moody's Ratings. The deal will repay investors through a senior-subordinate structure, so no subordinate notes will receive principal payments unless the more senior notes are fully paid off, Moody's said.
All tranches of notes benefit from total hard credit enhancement equaling 8.75% of their respective balances, Moody's said, which is a drop from the 9.0% and 9.8% credit enhancement levels seen on the 2024-1 and 2020-1 series, respectively. Fitch Ratings says the A1, A2, A3 and A4 tranches have legal final maturities of March 16, 2026, Nov. 15, 2027, May 15, 2029 and Oct. 15, 2031, respectively.
Excess spread amounts to 2.14% per annum, Fitch said.
Fitch notes that 74.8% of the collateral pool, made up entirely of 3,103 loans, is backed by trucking—or transportation—equipment. That is a lower concentration than its previous deal, the VFET 2024-1, whose pool was 77.3% composed of trucking equipment. While such a large concentration might normally pose a concentration risk to a pool, Fitch notes that this is a stronger-performing segment and helps shore up the deal's credit.
As for other pool characteristics, the loans are primarily financing new trucking and construction equipment, which have an average principal balance of $241,720. On weighted average (WA) basis, the loans have an original term of 57 months, and an average annual percentage rate (APR) of 6.85%.
The pool is highly diversified, with the top obligor accounting for 1.40% of the outstanding pool balance, while the top 10 obligors account for 9.70% of the outstanding pool.
Moody's assigns P1 to the A1 notes and Aaa to the A2 through A4 notes. Fitch, meanwhile, assigns F1+ to the A1 notes, and AAA to the A2 through A4 notes.
