NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to two classes of notes issued by OWN Equipment Fund I LLC (OWN or the Issuer), an equipment rental ABS transaction.
The Transaction represents EquipmentShare.com Inc.’s (EQS, Company, Equipment Manager or Co-Sponsor) second equipment rental ABS transaction as Equipment Manager and first as Co-Sponsor. The other co-sponsor will be OWN Tactical Equipment I LLC (OWN Tactical or Managing Investor), a newly formed HoldCo managed by MidOcean Credit Fund Management LP. The notes are supported by an amortizing pool of collateral, which as of the October 31, 2024 Statistical Cutoff Date, has 10,276 pieces of equipment and an Aggregate Portfolio Value (APV) of approximately $506.4 million. The portfolio is comprised of nine different equipment types, which are used mainly for construction, primarily from ten different manufacturers; the ten manufacturers comprise 92.34% of APV.
The Managing Investor owns a special purpose entity, the Issuer, which leases equipment to EQS under a management agreement. The equipment is then rented to end users by EQS. The end user’s rental is typically 28 days and subject to renewal; according to the Company, the user often opts to renew for multiple months. In the case of a Manager Termination Event, rental to users will not be renewed by EQS and the Issuer can take possession of the equipment at the end of the rental period. EQS was founded in 2015 and is one of the largest equipment rental companies in the U.S., renting out its own equipment as well as managing rentals of equipment owned by third parties (OWN Program). As of September 30, 2024, EQS had 270 full-service branch locations in 43 states with $6.2 billion in original equipment cost (OEC) under management, including $4.0 billion under the OWN Program.
The Transaction is secured by the equipment owned by the Issuer. EQS manages the Issuer’s equipment and has also entered into a lease with the Issuer. Under this lease, EQS pays the Issuer a variable lease payment equal to the rent billed by EQS to its customers for rental of the equipment, net of certain fees and expenses owed to EQS as Equipment Manager. The lease payments are the initial source of funds for payments to the noteholders. Rouse Appraisals LLC (Rouse) is the Valuation Agent and will provide a valuation of the equipment collateral on a monthly basis. The transaction’s overcollateralization represents the excess of the APV, defined as the lesser of the Aggregate Net Book Value (ANBV) or Net Orderly Liquidation Value (NOLV), over the note principal balance.
If the lease payments generated by the equipment rentals are insufficient to make scheduled payments on the notes, including principal payments to maintain the required overcollateralization, or certain other events occur, a Liquidation Event will occur. This will require the equipment to be liquidated with the proceeds used to make the required payments to the noteholders. Ritchie Bros. Auctioneers (America) Inc. is the liquidation agent and is responsible for liquidating the collateral, if required.
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Related Publication
Methodologies
- ABS: General Global Rating Methodology for Asset Backed Securities
- Structured Finance: Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology
Disclosures
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.
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