PriyaPatelTLDR:
Hewlett-Packard Financial Services is planning to issue $895.2 million in asset-backed securities (ABS) backed by revenue from fixed-rate operating leases, finance leases, and loans that finance business critical technology equipment and other properties, including software. The collateral pool for the ABS consists of high credit quality assets, with contracts to obligors that are large institutions making up the majority of the discounted pool balance. The ABS deal is expected to close on January 31, 2024, with BofA Securities as the lead underwriter. Moody’s and S&P Global Ratings will assign ratings to the ABS notes.
Article:
Hewlett-Packard Financial Services (HPEFS) plans to raise $895.2 million in asset-backed securities (ABS) backed by revenue from fixed-rate operating leases, finance leases, and loans that finance business critical technology equipment and other properties, including software. The ABS deal, named HPEFS Equipment Trust 2024-1, is sponsored by HPEFS and is expected to close on January 31, 2024, with BofA Securities as the lead underwriter.
Moody’s Investors Service noted that the collateral pool for the ABS consists of high credit quality assets and an experienced servicer, among other positive deal characteristics. Contracts to obligors that are large institutions make up about 88% of the discounted pool balance, contributing to the high quality of the assets. The contracts in the collateral pool have an average remaining term of 38 months, with contracts with remaining terms of 35 months or less making up 51.5% of the discounted pool balance.
HPEFS Equipment Trust 2024-1 will issue the ABS notes through A, B, C, and D notes in six classes, and a senior-subordinate structure, according to Moody’s and S&P Global Ratings. The most senior tranche of notes, A1, has a legal final maturity date of January 21, 2025, while the A2 through D tranches have legal final maturity dates of May 20, 2031. All of the notes are fixed, according to the rating agencies. Moody’s expects to assign ratings of P1 to the A1 notes, Aaa to the A2 through B tranches, Aa1 to the class C notes, and A2 to the class D notes. S&P will assign an A1+ rating to the A1 tranche, AAA to the A2 and A3 notes, AA to the class B tranche, A to the class C notes, and BBB to the class D notes.
Credit to the notes is supported by a cash reserve account funded at closing, equivalent to 1.00% of the initial discounted contract balance, and annual excess spread amounting to 1.76%, which further strengthens the notes.
