Asset

GreatAmerica plans to issue $637.8 million in trade financing

GreatAmerica Financial Services is preparing a $637.8 million asset-backed securities (ABS) transaction, secured by a set of commercial leases and low-cost loans the company originated.

GreatAmerica is an established issuer of equipment lease ABS, and the GreatAmerica lease receivable financing, 2022-1, represents the 22n/a such a platform deal, according to a report from FitchRatings. The agreement is known as GALC 2022-1.

Office imaging equipment, such as copiers or printers, make up the majority, 62.4%, of the transaction’s warranty pool. Although this represents the majority of the underlying guarantees in the agreement, the percentage has dropped from the previous proportion of 67.6% in GALC 2021-2. FitchRatings notes that the decrease in the concentration of copiers aligns with industry trends, due to post-pandemic work-from-home conditions.

Despite the concentration of imaging equipment, the rating agency added, these types of equipment generally outperformed other types of equipment in the GreatAmerica portfolio, according to Fitch.

Based on various types of industry concentration and geographic obligor locations, a typical borrower from the underlying pool is likely to be a service provider ordering a printer or copier, and could be located anywhere where in the US, but more than likely based in Texas.

Bank of America Securities is the lead manager of the transaction, which will issue the notes under a combination of pro-rated and sequential compensation structure. The Trust will allocate interest to the Class A Notes on a pro rata basis and then distribute it sequentially to Classes B and C upon reaching certain principal payment thresholds.

GALC 2022-1 will assign the main sequentially to all classes. If an Event of Default relating to the Indenture occurs, all principal will be allocated to the Class A-1 Notes and then pro rata between the Class A-2 through A-4 Notes.

The transaction’s credit enhancement includes a cash reserve account and overcollateralization, according to Fitch.

Fitch plans to assign an “F1+” rating to the A-1 class; “AAA” for classes A-2 to A-4; ‘AA’ for class B tickets and ‘A’ for class C tickets.

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 initial term of 56 months, the rating agency said.

Breakdown by type of equipment, and excluding office imaging, automobile repair represents 7.58% of the pool; then light industrial or construction equipment with 6.20%; computer equipment with 5.40%; and franchised equipment with 4.22%.

As for the distribution by industry, services represent the largest share of the pool, at 45.6%, followed by retail trade with 12.9%; wholesale with 8.18%; finance, insurance and real estate with 7.22% and manufacturing industry with 7.20%.

The basin appears to be more geographically diverse, with Texas accounting for the highest percentage at 14.4%. Florida and California follow and make up the top three states, with 8.1% and 5.6% respectively.