DBRS Finalizes Provisional Ratings on Chesapeake Funding II LLC, Series 2018-2

DBRS, Inc. (DBRS) finalized its provisional ratings on the following classes of notes issued by Chesapeake Funding II LLC, Series 2018-2 (the Transaction or the Issuer):

-- $725,000,000 Series 2018-2, Class A-1 Notes rated AAA (sf)
-- $200,250,000 Series 2018-2, Class A-2 Notes rated AAA (sf)
-- $28,350,000 Series 2018-2, Class B Notes rated AA (sf)
-- $23,200,000 Series 2018-2, Class C Notes rated A (sf)
-- $23,200,000 Series 2018-2, Class D Notes rated BBB (sf)

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 under which they have invested. The ratings address the timely payment of interest on a monthly basis and principal by the legal final maturity date.

(3) Element Fleet Corporation’s (EFC) capabilities with regard to originations, underwriting and servicing.

(4) DBRS has performed an operational review of EFC 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
-- The lessee is 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 EFC, 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’s collateral consists of the following:

-- 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
-- Class A-1 and Class A-2 credit enhancement is 11.25% and consists of subordination (7.25%), overcollateralization (OC; 3.00%) and an initial cash reserve (1.00%).
-- Class B credit enhancement is 8.50% and consists of subordination (4.50%), OC (3.00%) and an initial cash reserve (1.00%).
-- Class C credit enhancement is 6.25% and consists of subordination (2.25%), OC (3.00%) and an initial cash reserve (1.00%).
-- 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 in connection with this rating action.

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

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