KBRA Assigns Preliminary Ratings to Crockett Partners Equipment Company IIA LLC
25 Jul 2024 | New York
KBRA assigns preliminary ratings to three classes of notes issued by Crockett Partners Equipment Company IIA LLC (the Issuer), an equipment rental ABS transaction.
The transaction represents Crockett Partners Fund I, LP’s (Sponsor or Fund) and EquipmentShare.com Inc.’s (EQS or Equipment Manager), first equipment rental ABS transaction. The notes are supported by an amortizing pool of collateral, which as of the May 31, 2024 statistical cutoff date, has 8,975 equipment and an aggregate net book value (ANBV) of approximately $498.0 million. The portfolio is primarily comprised of nine different equipment types from ten different manufacturers comprising approximately 99% and 88%, respectively, of the collateral as a percentage of ANBV.
The Sponsor owns a special purpose vehicle, Crockett Partners Equipment Company II, LLC (Crockett), which sells a pool of equipment to the Issuer at closing. The equipment is rented to end users by EQS under an equipment management agreement. The Sponsor was formed in 2022 and is controlled by 1819 Partners, LLC, a Memphis-based private investment firm. 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 March 31, 2024, EQS had 240 locations in 41 states and had $5.7 billion in original equipment cost (OEC) under management, including $2.0 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 pursuant to which EQS pays the Issuer a lease payment equal to a substantial portion of rental payments generated by the equipment and receives from the Issuer maintenance and servicing platform fees. The lease payments are the initial source of funds for payments to the noteholders. 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.
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