KBRA assigned preliminary ratings to eight classes of notes issued by SCF Equipment Leasing 2026-1 and SCF Equipment Leasing Canada 2026-1 Limited Partnership, an equipment ABS transaction.
SCF 2026-1 represents the 15th equipment ABS transaction sponsored by Stonebriar Commercial Finance (SCF). Additionally, SCF services the Granite Park 2023-1 transaction, which is an equipment ABS backed by collateral originated and serviced by the company.
The SCF 2026-1 transaction is secured by: (1) a portfolio of equipment lease contracts and equipment loan contracts, together with interests in the related equipment and other collateral, and (2) certain portfolio interest certificates evidencing 100% beneficial interest in a portfolio of leases of titled motor vehicles and the related equipment. The underlying contracts are collateralized by essential use assets in a variety of industries such as marine, mining, real estate, energy and manufacturing equipment. All of the contracts were directly or indirectly originated by SCF or Stonebriar Commercial Finance Canada.
SCF 2026-1 will issue eight classes of notes, including a short-term money market tranche. The transaction features an acquisition account, which is funded on the closing date, which may be used, through the second payment date after the closing date, so long as no event of default has occurred, to purchase 2 specifically identified contracts. 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 of the portfolio is approximately $957.87 million as of the portfolio calculation date defined as the close of business on Aug. 31, 2026 for the initial contracts, and Sept. 30, 2026 for all 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 9.65%. The portfolio is comprised of 96 contracts to 47 obligors. The average contract balance is approximately $9.97 million and the average exposure to an obligor is approximately $20.38 million. The maximum exposure to an obligor is approximately $72.80 million or approximately 7.60% of the initial ADCB.
