DBRS Confirms and Assigns New Rating to Chesapeake Funding II LLC

DBRS, Inc. (DBRS) has today assigned a new rating to the following notes (the Notes) issued by Chesapeake Funding II LLC (the Issuer):

-- Series 2017-1 Notes, Class A rated A (sf), commitments thereunder to become effective April 7, 2017.

Chesapeake Funding II LLC represents a securitization program established by Element Fleet Management Corp. (Element). The Notes are secured by a first-priority, perfected security interest in the following (the Collateral):
-- Vehicles titled in the name of the titling trusts: Gelco Fleet Trust (GFT) and D.L. Peterson Trust (DLPT),
-- The related open-end (and potentially closed-end) fleet leases,
-- Loans primarily to regional rental car companies secured by vehicles and
-- Vehicles acquired by GFT and DLPT at the request of lessees that are in the process of being leased.

Gelco Corporation (Gelco) and Element Vehicle Management Services, LLC (VMS), both subsidiaries of Element, are the originators for the transaction. Gelco and VMS and each of their affiliated companies provide vehicle leasing and fleet management services, including fuel and maintenance cards as well as accident management services, throughout the United States with leading market shares across many of their product lines. Gelco is the servicer for the transaction.

Series 2017-1 has a 12-month revolving period, during which time principal collections are allocated to maintain the required credit enhancement.

The A (sf) rating for Series 2017-1 are based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS stressed loss assumptions under various stress scenarios.
-- The yield supplement account is established to supplement the yield from any lease that does not meet a minimum yield requirement.
-- The ability of the Transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. The rating addresses the payment of timely interest on a monthly basis and principal by the final maturity date.
-- Gelco’s and VMS’s capabilities with regard to originations and underwriting.
-- DBRS has performed an operational review of Gelco and VMS and considers the companies to be acceptable originators.
-- Gelco’s capabilities with regard to servicing.
-- DBRS has performed an operational review of Gelco and considers the company to be an acceptable servicer.
-- The high credit quality and historical performance of the Collateral.
-- The leased vehicles are essential use vehicles for customers; therefore, such leases are likely to be affirmed by an obligor in a bankruptcy proceeding.
-- The legal structure and presence of legal opinions that address the true sale of the assets, the non-consolidation of the Issuer with Gelco and VMS, the Issuer’s valid first-priority security interest in the assets and the consistency with the DBRS “Legal Criteria for U.S. Structured Finance.”

In addition to the issuance of Series 2017-1 and the future combination of the Collateral from Chesapeake Funding LLC and Chesapeake Funding II LLC on April 7, 2017, the Chesapeake Funding II LLC securitization program has been performing within expectations. DBRS has, therefore, confirmed the ratings on the following outstanding series of notes issued by Chesapeake Funding II LLC:

Chesapeake Funding II LLC, Series 2015-1
-- Class A Notes confirmed at A (sf)

Chesapeake Funding II LLC, Series 2015-2
-- Class A Notes confirmed at A (sf)

Chesapeake Funding II LLC, Series 2016-1
-- Class A-1 Notes confirmed at AAA (sf)
-- Class A-2 Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)

Chesapeake Funding II LLC, Series 2016-2
-- Class A-1 Notes confirmed at AAA (sf)
-- Class A-2 Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)

Notes:
The principal methodology is Rating U.S. Auto Fleet Lease Securitizations, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Please see attached appendix for additional information regarding sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.