KBRA Assigns Ratings to SCF Equipment Leasing 2024-1

KBRA assigns ratings to eight classes of notes issued by SCF Equipment Leasing 2024-1 LLC and SCF Equipment Leasing Canada 2024-1 Limited Partnership (collectively SCF 2024-1), an equipment ABS transaction.

SCF 2024-1 represents the 12th equipment ABS sponsored by Stonebriar Commercial Finance LLC (SCF or the Company). Additionally, SCF services the Granite Park 2023-1 transaction, which is an equipment ABS backed by collateral originated by the Company. The SCF 2024-1 transaction is secured by: (1) a portfolio of equipment lease contracts and equipment loan contracts (together, the Contracts), together with interests in the related equipment and other collateral; (2) certain portfolio interest certificates evidencing 100% beneficial interest in a portfolio of leases of titled motor vehicles and the related equipment; and (3) equity interests in certain limited purpose entities formed to own aircraft leases and the related aircraft. The underlying Contracts are collateralized by essential use assets in a variety of industries such as marine, rail, aircraft, transportation, medical, energy and manufacturing equipment. All of the Contracts were directly or indirectly originated by SCF or Stonebriar Commercial Finance Canada Inc. (SCF Canada). Founded in 2015, SCF is a privately owned commercial equipment finance company located in Plano, TX. The Company originates secured loans and leases in a variety of industries that are collateralized by essential use assets. As of March 31, 2024, SCF had funded approximately $12.0 billion of investments with a current owned portfolio of $5.1 billion in net investment.

SCF 2024-1 will issue nine classes of notes, including a short-term money market tranche (Notes). The transaction features an acquisition account, which is funded on the closing date, which may be used, through the first anniversary of the closing date, so long as no event of default has occurred, to purchase 10 specifically identified contracts (the Additional Contracts) that currently collateralize the SCF 2019-2 transaction. Or, if any of the Additional Contracts prepays, replacement Additional Contracts may be purchased, subject to rating agency confirmation. Credit enhancement includes overcollateralization, excess spread, a reserve account, and subordination for senior classes. The initial aggregate discounted contract balance (the Initial ADCB) of the portfolio is approximately $806.94 million as of the Portfolio Calculation Date defined as the close of business on April 30, 2024 for the initial contracts and July 31, 2024 for the Additional Contracts. The Initial ADCB is based on the projected equipment loan and lease cash flows, as well as the residual value of the related equipment, discounted at the respective contract’s implicit rate of return (IRR). The weighted average IRR is 10.07%. The portfolio is comprised of 52 contracts to 34 obligors. The average contract balance is approximately $15.52 million and the average exposure to an obligor is approximately $23.73 million. The maximum exposure to an obligor is approximately $88.63 million or approximately 10.98% of the Initial ADCB.

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