Transportation and medical equipment are among the guarantees of the latest Encina project

The equipment leases secure the $246.4 million asset-backed securities (ABS) agreement, which will issue notes through the Encina Equipment Finance Trust, 2022-1.

The transaction is the first for Encina Equipment Finance, headquartered in Westport, Connecticut, since Benefit Stress Partners acquired a majority stake in the company in December 2021, according to a pre-sale report from ratings agency Kroll. Jump.

Encina Equipment, 2022-1, is also different in several other ways. At closing, the securitization will have a reserve account funded at 1.0% of the original ADB and will not be redeemable. In the previous agreement, Encina Equipment, 2022-1, the reserve account started at 1.25% and was allowed to amortize at 1.0% of the initial ADB, beginning in month 25.

The total firm credit enhancement on the Encina Equipment deal, 2022-1, is higher across all ticket classes, with increases ranging from 2.5% to 5.3%. Excess spread, meanwhile, ranges from 1.9% to 5.6% pa, lower than the previous transaction, KBRA said. Overall, however, the rating agency said the deal’s credit enhancement remains consistent with its individual rating constraints.

KBRA plans to assign “AAA” ratings to the $119.8 million, A-1 and $60 million, A-2 notes, respectively; “AA” and “A” to Notes B and C, respectively, and “BBB” and “BB” to Notes D of $21.2 million and $18.4 million, E, respectively.

The bonds have legal final maturity dates ranging from August 16, 2027 to April 15, 2030.

With a deadline of April 30, the pool consists of 153 contracts for operators in manufacturing, transportation and warehousing, health and social care, among other types of equipment.

BofA Securities, Truist Securities and Citizens Capital Markets are the first purchasers of the notes, according to KBRA.

The main types of equipment represent approximately 60% of the portfolio in terms of securitization value. Types of manufacturing equipment account for 19.3% of the transaction, by securitization value, according to the KBRA. Other types include medical (13.9%), construction (12.8%), trucking (10%) and marine 6.1%), KBRA said.

Although the rating agency expressed concerns about the credit quality of obligors, given that Encina’s target obligors generally have credit characteristics consistent with investment grade, some of these concerns may be mitigated. as Encina focuses on debtors with revenues over $250 million, backed by private sponsors.

In a positive credit, Encina is an experienced repairer for its existing Encina Equipment Finance, 2021-1. From the May 2022 payment date, the pool has amortized at a pool factor of 65%. The transaction experienced no payment defaults and no payment delays of more than 61 days. There was only one month with a payment arrears of 31 to 60 days throughout the term of the agreement, KBRA said.