DBRS Morningstar Assigns Provisional Ratings to GCI Funding I LLC, Fixed Rate Asset Backed Notes, Series 2021-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of Fixed Rate Asset Backed Notes (the Series 2021-1 Notes) to be issued by GCI Funding I LLC:

-- $241,000,000 Fixed Rate Asset Backed Notes, Series 2021-1, Class A at A (sf)
-- $12,000,000 Fixed Rate Asset Backed Notes, Series 2021-1, Class B at BBB (sf)

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

(1) The transaction’s capital structure and the form and sufficiency of available credit enhancement.
-- Overcollateralization, note subordination (as applicable), and the Series 2021-1 Restricted Cash Account and the Series 2021-1 Revenue Reserve Account amounts create credit enhancement levels and liquidity that are commensurate with the proposed ratings.
-- The cash flows expected to be generated by the collateral pool for the Series 2020-1 Notes under the stressed cash flow scenarios for each ratings are sufficient to make interest and principal payments to investors in accordance with the terms of the Related Documents.

(2) The cash flow scenarios consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary "Global Macroeconomic Scenarios: March 2021 Update" published on March 17, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on March 17, 2021, and are reflected in DBRS Morningstar's rating analysis. The assumptions consider the moderate macroeconomic scenario outlined in the commentary (the moderate scenario serving as the primary anchor for current ratings). The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions. At this point, DBRS Morningstar does not make any adjustments to its original stresses and cash flow scenarios based on the current favorable industry conditions and the relatively benign impact on the container leasing industry from the coronavirus pandemic, which was followed by a very strong rebound in operating metrics.

(3) After rebounding in the middle of 2020, the demand for containers remains very strong, with optimistic near-term containerized trade volume projections being backed by forecast healthy trade volumes.

(4) Container shipping liners' recent financial performance has been strong, with significantly better results recorded in 2020 than originally feared amid the peak of the global coronavirus pandemic, and even stronger outlook for 2021 and 2022. While such outstanding performance may not be sustained long term, it bodes well for the near- to medium-term credit performance outlook for container lessors.

(5) The obligor mix is relatively concentrated, which is typical for the industry, with the five largest lessees accounting for approximately 74.8% of collateral pool (by net book value (NBV)) as of the Statistical Cut-Off Date. The four largest lessees, which together accounted for approximately 68.4% of NBV, represent the leading container shipping liners.

(6) The high proportion of containers on long-term lease contracts has helped support high utilization rates and relatively stable per diems through the pandemic, as reported by major marine container lessors. At the onset of the transaction, the collateral pool for the Series 2021-1 Notes will exclusively comprise marine containers subject to a mix of long-term leases and direct-finance leases, with no off-hire containers. As such, the repayment profile for the Series 2021-1 Notes is expected to benefit from a relatively long remaining lease term for the collateral pool.

(7) The structural features of the transaction that require the Class A Notes and Class B Notes to enter into an accelerated principal amortization if certain performance triggers are tripped or if credit enhancement deteriorates.

(8) Global Container International LLC’s (GCI) capabilities with regard to managing the fleet of marine containers. While the Company has been operating for three years since its inception, the executive management team has more than 50 years of combined industry experience and comprises former President of Beacon Intermodal (Geffrey Gannon, founder and Chief Executive Officer of GCI) and the former Senior Vice President at TAL International (Adrian Dunner, founder and Chief Operating Officer of GCI). Moreover, GCI has strong equity backing from Wafra Inc. and Hudson Structured Capital Management.

DBRS Morningstar has performed an operational review of GCI and considers the company to be an acceptable manager of the marine container leasing fleet.

(9) The legal structure and expected legal opinions that will address true sale, enforceability, nonconsolidation, and security interest perfection issues, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating Marine Container Securitizations (January 29, 2021). which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press releases: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 related 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 [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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