DBRS Assigns Provisional Ratings to Chesapeake Funding II LLC, Series 2017-3

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes issued by Chesapeake Funding II LLC, Series 2017-3 (the Transaction):

-- Series 2017-3, Class A-1* rated AAA (sf)
-- Series 2017-3, Class A-2* rated AAA (sf)
-- $14,140,000 Series 2017-3, Class B rated AA (sf)
-- $11,570,000 Series 2017-3, Class C rated A (sf)
-- $11,570,000 Series 2017-3, Class D rated BBB (sf)

• Aggregate Class A will be $462,720,000

The ratings are based on DBRS’s review of the following analytical considerations:

(1) 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.
(2) The ability of the Transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. The ratings address the payment of timely interest on a monthly basis and principal by the legal final maturity date.
(3) Gelco Corporation (Gelco) capabilities with regard to originations, underwriting and servicing.
(4) DBRS has performed an operational review of Gelco and considers the company to be an acceptable originator and servicer.
(5) The high credit quality and historical performance of the collateral.
(6) The leased vehicles are essential-use vehicles for customers; therefore, such leases are likely to be affirmed by an obligor in a bankruptcy proceeding.
(7) These leases are hell-or-high water and triple net with:
-- No set-off language and
-- Lessee responsible for all taxes/expenses.
(8) The legal structure and presence of legal opinions that address the true sale of the assets, the non-consolidation of the Issuer with Gelco, the Issuer’s valid first-priority security interest in the assets and the consistency with the DBRS “Legal Criteria for U.S. Structured Finance” methodology.

The Transaction represents the fourth term asset-backed securities (ABS) transaction issued by Chesapeake Funding II LLC, a master trust-like platform established in December 2015 in connection with Element Fleet Management Corp.’s acquisition of the U.S. fleet leasing and management services business of General Electric Capital Corporation. It also represents the second term ABS transaction issued by Chesapeake Funding II LLC since its merger with Chesapeake Funding LLC effective April 7, 2017.

The Transaction’s collateral consists of the following (collectively, 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 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.

CREDIT ENHANCEMENT
-- The Class A-1 and Class A-2 (collectively, the Class A Notes) credit enhancement is 11.23% and consists of subordination (7.23%), overcollateralization (OC; 3.00%) and an initial cash reserve (1.00%).
-- The Class B credit enhancement is 8.49% and consists of subordination (4.49%), OC (3.00%) and an initial cash reserve (1.00%).
-- The Class C credit enhancement is 6.24% and consists of subordination (2.24%), OC (3.00%) and an initial cash reserve (1.00%).
-- The Class D credit enhancement is 4.00% and consists of OC (3.00%) and an initial cash reserve (1.00%).

The cash reserve account amortizes to a floor equal to one-third of the initial amount. All credit enhancement figures are percentages of the outstanding securitization value.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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

The full report providing additional analytical detail is available by clicking on the link or by contacting us at info@dbrs.com.