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GreatAmerica Financial Services is preparing a $637.8 million asset-backed securities (ABS) transaction, secured by a pool of small-ticket commercial leases and loans that the company originated.
GreatAmerica is an established issuer of equipment lease ABS, and the GreatAmerica Leasing Receivables Funding, 2022-1, represents the 22nd such deal from the platform, according to a FitchRatings report. The deal is known as GALC 2022-1.
Office imaging equipment, such as copiers or printers, comprise a majority, 62.4%, of the of the transaction’s collateral pool. While that represents a majority of the deal’s underlying collateral, the percentage has dropped from the previous proportion of 67.6% in GALC 2021-2. FitchRatings notes that the decrease in copier concentration aligns with industry trends, due to post-pandemic working-from-home conditions.
Despite the concentration of imaging equipment, the rating agency added, those types of equipment have generally outperformed other equipment types within the GreatAmerica portfolio, according to Fitch.
Based on various types of concentration across industry and geographic locations of the obligors, a typical borrower from the underlying pool is likely to be a service provider ordering a printer or copier, and could be located anywhere in the U.S., but more than likely is based in Texas.
Bank of America Securities is lead manager on the transaction, which will issue the notes through a combination pro-rata and sequential pay structure. The trust will allocate interest to the class A notes on a pro-rata basis, and then distributed sequentially to classes B and C after it meets certain principal payment thresholds.
GALC 2022-1 will allocate principal sequentially to all classes. Should an indenture event of default occur, all principal would be allocated to class A-1 notes, and then pro-rata among classes A-2 through A-4 notes.
The transaction’s credit enhancement includes a cash reserve account and overcollateralization, according to Fitch.
Fitch expects to assign an ‘F1+’ rating to the A-1 class; ‘AAA’ to the A-2 through A-4 classes; ‘AA’ to the class B notes and ‘A’ to the class C notes.
Some 36,769 contracts underpin the collateral pool, with an average principal balance of $18,308. On a weighted average (WA) basis, the loans have an original term of 56 months, the rating agency said.
When broken down by equipment type, and outside of office imaging, automotive repair accounts for 7.58% of the pool; then light industrial or construction equipment with 6.20%; computer hardware with 5.40%; and franchise equipment with 4.22%.
As for the breakdown by industry, services account for the largest portion of the pool, at 45.6%, followed by retail trade with 12.9%; wholesale trade with 8.18%; finance, insurance and real estate with 7.22% and manufacturing, with 7.20%.
The pool appears to be more geographically diverse, with Texas accounting for the largest percentage, at 14.4%. Florida and California follow and make up the top three states, with 8.1% and 5.6%, respectively.
AuthorOctober 9, 2022 at 2:34 PM
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