KBRA Assigns Preliminary Ratings to North Mill Equipment Finance’s Fourth Equipment ABS

Kroll Bond Rating Agency assigned preliminary ratings to five classes of notes issued by NMEF Funding 2021-A. The notes are newly issued asset-backed securities backed by a portfolio of equipment leases and loans. NMEF 2021-A is North Mill Equipment Finance’s fourth equipment ABS.

North Mill is an independent equipment finance company. It was created in 2012 when Colford Capital Holdings acquired Equilease Financial Services and re-branded Equilease’s business as North Mill. Equilease was founded in 1957 as the captive specialty finance company of Allied Capital. Under new management in 2017, North Mill implemented a two-part strategic change to its originations strategy. The strategy involved substantially pausing all originations and focusing on portfolio servicing and shifting toward a more diversified asset profile. North Mill’s strategy aims to move away from a heavy reliance on long-haul trucking to a more diversified collateral profile. Wafra Capital Partners acquired North Mill from Colford Capital Holdings in August 2018.

NMEF 2021-A is backed by a pool of equipment loans and leases with a statistical discounted pool balance of $215.173 million based on a 4.25% discount rate. As of the initial cutoff date, the discounted contract value will be at least $227.6 million. The total collateral may increase up to $275 million through the addition of contracts during the three-month prefunding period. The pool is concentrated in transportation and construction contracts; however, it also includes 26% in medical equipment contracts. This is the first time that a North Mill equipment ABS will include a significant portion of non-transportation equipment contracts and is reflective of North Mill’s continued strategy to diversify originations. NMEF 2021-A will issue five classes of notes, including a short-term tranche. Credit enhancement includes excess spread, a reserve account, overcollateralization and subordination for senior classes.

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