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Global Credit Research - 03 Jan 2011
$750 million (maximum) of asset-backed securities rated.
New York, January 03, 2011 -- Moody's Investors Service assigned the rating of Baa1 (sf) on June 29,
2010 to the Floating Rate Asset-Backed Notes, Series 2010-1
(Series 2010-1 or the Notes) issued by Textainer Marine Containers
Limited (TMCL or the Issuer), an affiliate of Textainer Equipment
Management Limited (TEML or the Manager). Series 2010-1
are variable funding notes with an initial maximum of $750 million
which can be increased at the Issuer's request to up to $850 million.
TEML is a full-service global leasing company that specializes
in leasing marine cargo containers and is a subsidiary of Textainer Group
Holdings Limited, which, with its subsidiaries, is the
largest lessor of standard freight marine containers in the world.
Moody's also stated that there was no impact on its ratings of the
existing Series 2005-1 notes. The complete rating action
is as follows:
Issuer: Textainer Marine Containers Limited
$750,000,000 (maximum) Floating Rate Asset-Backed
Notes, Series 2010-1
The rating is based on the collateral consisting of a pool of marine containers,
cash flows anticipated to be generated by leases of the containers to
shipping companies, credit enhancement provided by overcollateralization
and a restricted cash account, the expertise of TEML as Manager
and the legal and structural features of the transaction.
The Issuer is a master issuing vehicle and all series share the same collateral
pool on a pari passu basis. The Issuer has previously issued its
Series 2000-1 notes and Series 2005-1 notes. Series
2005-1 is a term series which is paying down. The Series
2000-1 notes have been retired with the issuance of the Series
2010-1 notes. Like the retired series it replaces,
Series 2010-1 is revolving, providing liquidity for the purchase
of new containers. The revolving period is scheduled to last for
two years from closing. At that time if the revolving period is
not extended, the notes will 'convert' to term notes
and principal repayment begins. The legal final maturity is set
to be 15 years from the date of conversion. Prior to conversion
the Series 2010-1 notes have no scheduled principal payments but
may experience repayment in full or part based on borrowing base requirements
and cash receipts.
The required overcollateralization for all outstanding notes is established
based on an advance rate of 80.0% against a borrowing base
comprised of the book value of eligible containers plus the balance of
the restricted cash account. The restricted cash account is sized
to cover five months of interest on all of the Issuer's outstanding
TMCL is a special purpose Bermuda company formed to invest in containers
managed by TEML. A small minority interest in TMCL is held by affiliates
of Fortis Bank, N.V. while the balance is held by
a subsidiary of TGH.
The principal methodology used in rating the notes 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. Additional
research is available on http://www.moodys.com.
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.
V-SCORE AND PARAMETER SENSITIVITIES
Moody's V Score. The V Score for this transaction is Medium.
The V Score indicates "Medium" uncertainty about critical assumptions.
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 that underlie the ratings within the categories of data quality,
historical performance and the level of disclosure for each of the asset
class sector and the issuer; transaction complexity, analytical
modeling and the market value risk; transaction governance,
backup servicing, alignment of interests and legal, regulatory
and other risks. V Scores apply to the entire transaction (rather
than individual tranches). While the overall score is Medium,
significant deviations from 'Medium' within the individual
risk categories include the following: quality of historical data
risk for the sector and the issuer are low-medium due to lengthy
available history of key data series; historical downgrade rate risk
which is low-medium as only one transaction has seen downgrades
in this sector to date; experience and oversight of transaction parties
risk, which is medium-low due to Sponsor's experience
and presence of third-party to facilitate a replacement if necessary;
and alignment of interests risk which is low due the substantial residual
in the form of overcollateralization retained by the Issuer.
Moody's Parameter Sensitivities. We analyzed the potential model-indicated
rating impact under different stress scenarios by varying the utilization
rate, which indicates the percentage of containers subject to lease
at any period in time, for containers on both short-term
and long-term lease. The base case long-term utilization
rate is assumed to be constant of 93% across all container types,
while short-term utilization rate assumptions vary by container
type with each following a triangular distribution whose parameters were
developed from the sponsor's historical experience. We stress
the base case assumed utilization rates with immediate one-time
permanent declines of 3, 6, 9, and 12 percentage points
from the base case. Under such scenarios, the initial Baa1
rating might change as follows: (i) with both long-term and
short-term utilization rate lowered by 3 percentage points from
the base case, the Baa1 initial rating would migrate to Baa3;
(ii) with both long-term and short-term utilization rate
lowered by 6 percentage points from the base case, the Baa1 initial
rating would migrate to Ba2; (iii) with a base case long-term
and short-term utilization rate lowered by 9 percentage points,
the Baa1 initial rating would migrate to Ba3; (iv) with a base case
long-term and short-term utilization rate lowered by 12
percentage points, the Baa1 initial rating would migrate to B1.
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
Monte carlo simulation of asset and liability cash flows was the primary
quantitative technique used. Gross revenues generated by the container
leases were modeled through the simulation of various operating variables,
particularly utilization rates (percentage of containers under long or
short term leases) and per diem rates (lease pricing). Other simulated
variables included operating expenses, obligor defaults on long
term leases, proceeds from sold container dispositions and interest
rates. All of these variables were simulated via distributions,
which (apart from interest rates) were derived partially from historical
operational performance data and partially through qualitative assessments
of the company's expertise and the overall container leasing industry.
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. Moody's additionally considered other
rating indicators, such as expected loss and default frequency.
Key assumptions and variables simulated included the following:
(A) Utilization rate: (i) for long term lease the utilization rate
of containers is assumed to be constant of 93% throughout the life
of the transaction. (ii) for the short-term lease the utilization
of containers is assumed to follow a triangular distribution with its
parameters of minimum, mode and max vary by container types.
(B) Lease rate which is measured by per diem rate (PDR). The percentage
change in PDR is simulated annually and assumed to follow a normal distribution
with the mean and standard deviation derived from the sponsor's
historical information. (C) It is assumed that a portion of residual
value from the sales of containers will be realized. The percentage
is assumed to follows a triangular distribution with minimum, mode
and max of 80%, 90%, and 110% of depreciated
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, parties
not involved in the ratings, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the obligation satisfactory for the purposes of maintaining a credit
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.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's rates container lease-backed notes sponsored by Textainer
250 Greenwich Street
New York, NY 10007
No Related Data.
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