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Element Closes $4.8B ABS Funding Conduit for U.S. Fleet Management Business

December 17, 2015, 07:02 AM
Filed Under: Industry News

Element closes rated ABS notes offered through new US$4.8 billion Chesapeake Funding II LLC conduit to fund U.S. fleet assets

Element Financial announced that the Company has closed Chesapeake Funding II LLC, the new US$4.8 billion rated asset backed security (“ABS”) funding conduit that Element has established as the permanent funding platform for its U.S. fleet management business.

In conjunction with the establishment of this new ABS conduit, the Company today issued US$1.5 billion in variable funding notes and is expected to close an additional US$1.8 billion in term notes on December 31, 2015. Subsequent to these issuances, the Company will have un-drawn commitments of US$1.5 billion from Chesapeake Funding II LLC to fund future growth in fleet assets. Interest rate spreads for these notes were in line with previously funded fleet ABS transactions. Proceeds from the notes will be used to repay a portion of Element’s three-year term senior secured credit facility.

Element is one of the world’s largest fleet management companies serving more than 5,000 commercial and industrial business customers with equipment financing and servicing solutions for more than 1.6 million cars and light duty trucks in operation across North America, Australia and New Zealand.

Chesapeake Funding II LLC was established on the same structuring principles as Element’s initial fleet ABS conduit, Chesapeake Funding LLC, which has closed more than 17 offerings in the term market since 1999 and has issued more than US$7.7 billion in ABS securities to private and public investors since 2003 including four offerings totaling more than US$2.2 billion in 2009 in the wake of the financial crisis.

“By gaining early access to our new rated Chesapeake ABS conduit to permanently fund the U.S. fleet assets that we recently acquired from GE, we are ahead of schedule in bringing the funding costs attributable to these assets in line with the US$90 million to US$95 million in integration cost savings that we had earmarked for the GE fleet acquisition,” noted Steven K. Hudson, Element’s Chief Executive Officer.

“I’m particularly pleased that in the context of the current market, the response to the offering that we closed today was very strong with orders exceeding supply by a factor of almost two to one,” said Michel Beland, Element’s Chief Financial Officer.

JP Morgan Securities LLC acted as the sole structuring agent and lead arranger for these transactions together with a syndicate of 14 lenders.

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