Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six classes of notes issued by Encina Equipment Finance 2021-1, LLC ("Encina 2021-1"), an asset-backed securitization (ABS) collateralized by a pool of equipment loans and leases.
Encina 2021-1 represents Encina Equipment Finance, LLC’s first public equipment ABS transaction. Encina Equipment Finance, LLC, founded in 2017 and headquartered in Westport, Connecticut, is an independent equipment finance company focused on financing discrete revenue-producing essential-use medium- and large-ticket equipment to large corporate obligors.
As of April 30, 2021, the securitization value of the pool of equipment contracts backing the transaction is approximately $285 million. The pool includes 43 obligors with a top obligor concentration of 6.6% and an average contract securitization value of approximately $2.5 million. The pool is diversified by industries, equipment types and states.
Encina 2021-1 will issue six tranches of notes totaling $258.44 million. Credit enhancement consists of overcollateralization, a reserve account, subordination for senior classes and excess spread. The initial overcollateralization of 9.25% is subject to a target equal to the greater of 14.25% of the current securitization value and 8.75% of the initial securitization value. The reserve account will be funded in an amount equal to at least 1.25% at closing and is permitted to release to no less than 1% of the initial pool balance in month 25.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
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