New York, October 20, 2010 -- Moody's Investors Service has assigned a provisional rating of (P) Baa2
(sf) to the $155,000,000 Series 2010-1 Box Truck
Asset Backed Notes (the Notes, or, Series 2010-1) to
be issued by 2010 U-Haul S Fleet, LLC, an indirect
subsidiary of U-Haul International, Inc. (UHI or U-Haul).
U-Haul is a wholly owned subsidiary of AMERCO, a Nevada corporation.
The Co-Issuers of the Notes along with USF are 2010 DC-1,
LLC, 2010 TM-1, LLC, and 2010 TT-1,
LLC (each a Collateral SPV). Each Collateral SPV owns a particular
type of truck available for rental in the U-Haul system.
U-Haul will the fleet manager and administrator for this transaction.
The complete rating action is as follows:
Issuer: 2010 U-Haul S Fleet, LLC
Co-Issuers: 2010 DC-1, LLC, 2010 TM-1,
LLC, and 2010 TT-1, LLC
Series 2010-1, Assigned (P) Baa2 (sf)
The provisional rating is based on (1) cash flows generated by a static
pool of new and to-be-acquired box trucks owned by the Collateral
SPVs placed into service in the U-Haul System, (2) liquidation/residual
values of the box truck collateral, which consist of the 'TM' model
(10-foot box truck), the 'DC' model (14-foot box truck),
and the 'TT' model (20-foot box truck), (3) funds in the
Box Truck Purchase Account (pre-funding account) initially equal
to approximately 60% of the amount of Notes issued, (4) liquid
credit enhancement in the form of cash in reserve account sufficient at
closing and thereafter to cover 10 months of interest on the Notes,
(5) overcollateralization in the form of an advance rate against the assumed
asset value of each eligible box truck, (6) size and competitive
position of the U-Haul system (System) of do-it-yourself
moving and storage rental locations, (8) the expertise of UHI as
Fleet Manager in managing the box trucks for the benefit of the Issuer
and as the overall operator of the System, (9) performance guaranty
provided by AMERCO for timely payments and performance obligations of
U-Haul as both fleet manager and administrator, (10) liability
insurance coverage provided for the box trucks, (11) legal and structural
aspects of the transaction.
The issuance has been designed to permit resale under Rule 144A.
The Notes are secured by a security interest in certain assets of the
Issuer and co-Issuers such as the box trucks, payments due
from rental of each box truck owned by the co-Issuers, disposition
proceeds and warranty payments. Proceeds from note issuance will
be used to purchase additional eligible box trucks, fund the interest
reserve account, Box truck purchase account and pre-funding
period interest deficiency account. Pre-funding period ends
on the earlier of when the Box Truck purchase account holds less than
$10,000 or November 2011 payment date.
Credit support to the notes are offered by over-collateralization
provided by advance rates that vary by each truck type, an interest
reserve account and pre-funding interest reserve account.
The outstanding balance of the notes must at all times be less than or
equal to the sum of (i) the discounted aggregate assumed asset value of
the box trucks, (ii) disposition receivables, and (iii) cash
in the Box Truck Purchase Account. The discounted aggregate assumed
asset value is equal to the sum, for each box truck, of the
product of the applicable assumed asset value times the applicable advance
rate. The assumed asset value for each truck type is based on a
schedule intended to approximate normal economic depreciation (adjusted
for seasonality). Further, upon breach of certain Debt Service
Coverage Ratio (DCSR) triggers, a portion of the excess cash flow
will be applied to pay down the note principal.
If the Notes are not fully paid by the 84th month after closing (expected
final maturity), all net collections (revenues net of expenses)
will be applied to pay down the notes. The legal final maturity
is 13 years after closing. There is an event of default if notes
are not paid down 24 months before legal final maturity.
The principal methodology used in rating the transaction is described
below. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found on Moody's website.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of its website, at www.moodys.com/SFQuickCheck.
V-SCORE AND LOSS SENSITIVITY
Moody's V Score. The V Score for this U.S. Rental
Truck ABS transaction is Medium and indicates "Average" structure complexity
and uncertainty about critical assumptions. Moody's ratings analysis
makes assumptions about key factors, such as (1) the likelihood
of default of AMERCO (as the guarantor of U-Haul obligations),
(2) U-Haul as the fleet manager and administrator, and (3)
the realizable value of the portion of the fleet backing the ABS should
fleet liquidation be necessary. The last assumption in particular
has relatively high potential variability for the following reasons.
Disposition of trucks occurs irregularly- trucks usually have a
longer use (i.e., older age) prior to their disposition
than do non-commercial vehicles. Fewer re-sale value
observation points exist for trucks than there are for non-commercial
vehicles. And, like non-commercial vehicles,
data is unavailable on truck values in a large scale stressed liquidation.
To address this variability, we make assumptions we believe to be
conservative about appropriate recovery value haircuts.
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability around the various inputs
to a rating determination. The V Score ranks transactions by the
potential for significant rating changes owing to uncertainty around the
assumptions due to data quality, historical performance, the
level of disclosure, transaction complexity, the modeling
and the transaction governance that underlie the ratings. V Scores
apply to the entire transaction (rather than individual tranches).
Moody's Parameter Sensitivities. For this exercise, we analyzed
stress scenarios assessing the model-indicated output impact if
(a) the current credit estimate of U-Haul were to immediately decline
by 1,2 or 3 notches and (b) the assumed modeled haircuts to estimated
used truck market values were increased by 5%, 10%
and 15%. Haircuts are expressed as a percentage of the estimated
depreciated market value of the truck collateral. Please see methodology
below for assumption on truck collateral liquidation value. The
stresses increase the base case triangular distribution haircuts by the
following percentage points: 5%, 10% and 15%.
Using such assumptions, the Baa2 initial model-indicated
output for the Series 2010-1 Notes will change as follows:
(a) with initial credit estimate (Base credit estimate) of U-Haul,
the Baa2 initial note output would remain at Baa2 under the base recovery
but change to Baa3, Ba1 and Ba2 with the each lower recovery assumption;
(b) with Base credit estimate for U-Haul notched down by 1 level,
the Baa2 initial note output would be Baa3 under the base recovery and
change to Ba1, Ba2 and B1 with the each lower recovery assumption;
(c) with Base credit estimate for U-Haul notched down by 2 levels,
the Baa2 initial note output would be Ba1 under the base recovery and
change to Ba2, B1 and B2 with the each lower recovery assumption;
and (d) with Base credit estimate for U-Haul notched down by 3
levels, the Baa2 initial note output would be Ba2 under the base
recovery and change to B1, B2 and B3 with the each lower recovery
Parameter Sensitivities are not intended to measure how the rating of
the security might migrate over time, rather they are designed to
provide a quantitative calculation of how the initial rating might change
if key input parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged. Parameter Sensitivities
only reflect the ratings impact of each scenario from a quantitative/model-indicated
standpoint. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be assigned
in each case could vary from the information presented in the Parameter
PRINCIPAL RATING METHODOLOGY
In this transaction, the box truck collateral generates revenues
and incurs expenses, resulting in a net cash flow available to service
debt. Revenues and expenses, hence net cash flow, is
subject to fluctuation based on actual rental activity, expense
levels, etc. This contrasts with typical rental car transactions,
in which the rental car collateral generates only a fixed lease payment
from the sponsor, which bears all risk relating to the revenues
and expenses of the vehicles. Therefore in a fundamental sense
the primary drivers of collateral performance are truck revenues and expenses.
However, because there is a fixed payment schedule, the notes
do not amortize faster if revenues increase; instead excess cash
flow is returned to the sponsor. As such, we view the creditworthiness
of U-Haul/Amerco and the U-Haul System, along with
liquidation value of the collateral, are the ultimate determinants
of credit performance on the Notes. This is more similar to rental
car securitizations than might otherwise be expected given the structural
Taking this into consideration, Moody's analyzed losses if
box trucks are liquidated upon certain events of U-Haul or AMERCO
default. Monte Carlo simulation of box truck dispositions was the
primary quantitative technique used to establish the appropriate level
of credit enhancement. Disposition proceeds for each type of box
truck collateral (TM, DC and TT) was modeled through simulations
of disposition based on a simulated haircut of adjusted NADA values for
applicable truck (NADA truck values adjusted by the value of installed
box on that truck). The haircuts were simulated via distribution
derived through qualitative judgment. NADA truck values from years
2006 and 2010 were studied to understand the effect the state of an economy
and supply/demand dynamics of that truck type on used truck values,
which would guide liquidation proceeds.
Since U-Haul/AMERO is not rated by Moody's, an internal
assessment was made on the credit strength of U-Haul/AMERCO.
U-Haul default was simulated guided by this internal credit estimate.
In particular, Moody's stressed the credit estimate further.
This stressed level and Moody's idealized default rates were used
to determine the probability of U-Haul default.
Moody's analyzed both the probability of U-Haul default and the
magnitude of potential losses, if a default and ensuing liquidation
were to occur. Due to the strength of the System, a U-Haul
default was modeled probabilistically as either a Chapter 11 reorganization
or a Chapter 7 liquidation; in a Chapter 11 default U-Haul
could either reject or accept its role as Fleet Manager. Occurrence
of a Chapter 7 default or rejection in Chapter 11 caused a liquidation
of the collateral.
Upon liquidation, box trucks were assumed to be sold in the open
market 9 months after U-Haul Chapter 7 default or rejection in
Chapter 11. Nine month delay in fleet liquidation contemplated
potential legal challenges in obtaining control of the fleet and the potential
difficulties in marshalling and selling the box trucks in an open market.
Several thousand iterations were run, sufficient to achieve convergence
of the decision variables. After each iteration, the spread
paid to investors over the pricing index was calculated. The average
spread paid was then calculated over all iterations and compared to the
promised spread. Due to the stressful modeling assumptions,
the average simulated spread is generally lower than the promised investor
spread. This reduction is compared to the reduction appropriate
to the requested rating. The credit enhancement (advance rate)
was then adjusted to match the reduction in investor spread, over
the pricing index, which corresponds to the desired rating.
Moody's additionally considered other rating indicators, such as
expected loss and default frequency.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments in this transaction.
A pre-sale report for this transaction will be available on moodys.com.
The special report, "Updated Report on V Scores and Parameter Sensitivities
for Structured Finance Securities" is available on moodys.com.
Additional research, including reports for prior transactions sponsored
by ABCR or BTR, is available at www.moodys.com
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
confidential and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
MD - Structured Finance
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns provisional rating to U-Haul Box Truck asset-backed notes
250 Greenwich Street
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