KBRA assigned preliminary ratings to four classes of notes issued by VFI ABS 2022-1, LLC, an equipment ABS transaction.

Founded in 2001 and headquartered in Salt Lake City, Varilease Finance is an independent equipment finance company focused on leasing industrial and commercial equipment to upper- and middle-market businesses. VFI 2022-1 represents VFI’s first equipment ABS transaction.

As of the Jan. 10, 2022 statistical cut-off date, the pool of equipment contracts backing VFI 2022-1 (statistical pool) has a pool balance of $150.41 million. The pool balance is based on the projected cash flows for each contract discounted at each contract’s discount rate. The weighted average discount rate for the statistical pool is 10.06%. As of the initial cut-off date, the pool balance will equal at least $150.41 million and is expected to have characteristics substantially similar to the statistical pool.

The total collateral may increase by up to $25 million through the addition of equipment contracts during the three-month prefunding period. VFI 2021-1 will issue four classes of notes. Credit enhancement is comprised of overcollateralization, a cash reserve, a capitalized interest account, subordination benefiting senior classes and excess spread. The overcollateralization is subject to a target equal to 5.60% of the current pool balance and a floor equal to 2.50% of the initial pool balance. The reserve account is funded at 1.50% of the initial note balance (1.46% of the statistical pool) and is non-amortizing.