Press Release

Morningstar DBRS Assigns Provisional Credit Ratings to TMCL VII Holdings Limited, Series 2025-1H

Other
June 26, 2025

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of Fixed Rate Asset Backed Notes, Series 2025-1H (the Offered Notes) to be issued by TMCL VII Holdings Limited (the Issuer):

-- $400,000,000 Class A Notes at (P) BBB (sf)
-- $50,000,000 Class B Notes at (P) BB (sf)

CREDIT RATING RATIONALE/DESCRIPTION

The provisional credit ratings on the Offered Notes are based on Morningstar DBRS' review of the following considerations:

(1) The Offered Notes will be collateralized by the residual cashflows from seven marine container ABS transactions (Underlying Notes) issued by Textainer Marine Containers VII Limited (TMCL VII). Each series of Underlying Notes are secured by a specified collateral pool but can share funds to cover deficiencies at the bottom of the respective priority of payments for each series.

(2) The cash flow scenarios run by Morningstar DBRS for the Offered Notes incorporate the (a) asset cash flows for each Underlying Transaction after application of the utilization, per diem rate, residual realization, and operating expense stresses commensurate with a BBB (sf) rating and a BB (sf) rating for each of the Class A and Class B Notes, respectively; (b) the priority of payments and salient structural provisions for each Underlying Transaction, including the effect from (in the case of each series, as applicable) (i) items in the priority of payments for the Underlying Transaction which are subordinated to interest and principal payments on the Offered Notes, subject to the Subordination Agreement, (ii) Early Amortization Events, (iii) Cash Sweep Events, (iv) Anticipated Repayment Dates (ARD), and (v) Advance Rates; (c) interest, fees, scheduled and supplemental principal payments, and other expenses due in connection with each series of the Underlying Notes; and (d) the priority of payments and salient structural features outlined in the Indenture for the Offered Notes.
-- The cash flow scenarios assume the start of the first recessionary environment at the onset of this transaction and add the fourth recessionary period at the late stage of this transaction because of the extended sales curve assumed for disposition of older containers.

(3) The transaction's capital structure and the form and sufficiency of available credit enhancement.
-- Subordination (in the case of the Class A Notes), overcollateralization (OC), and the Restricted Cash Account, which covers six months of interest on the Offered Notes, create credit enhancement levels and liquidity that are commensurate with the ratings.
-- The cash flow scenarios run by Morningstar DBRS confirmed the sufficiency of the credit enhancement and other structural provisions to facilitate ultimate payment of interest (other than Additional Interest and Default Interest) and ultimate repayment of principal of the Offered Notes by the Legal Final Maturity Date from the cash flows attributable to the TMCL VII Equity Interest which would be generated in the Underlying Transactions in a stressed environment commensurate with a BBB (sf) and a BB (sf) credit rating for the Class A and Class B Notes, respectively.

(4) The assets of TMCL VII primarily comprise a pool of intermodal marine containers owned by it and managed by Textainer Equipment Management Limited (TMCL VII Manager or TEML) and TMCL VII's interest in the associated leases of such containers. Notable characteristics of the collateral owned by TMCL VII include the following:
-- Collateral includes the most representative types of marine containers, with 76.9% of Net Book Value (NBV) of the underlying containers being standard dry freight containers. In addition, 94.9% of the collateral by NBV is subject to either long-term leases or finance leases, thus locking in per diem rates on and ensuring utilization of the collateral for longer periods of time. The weighted average remaining lease term (by NBV) for the outstanding leases is approximately 4.0 years.
-- Approximately 75.2% (by NBV) of the containers were manufactured in 2020 or earlier.
-- As is typical for the industry, the obligor mix is relatively concentrated, with the five largest lessees accounting for approximately 62.1% of the collateral pool (by NBV). The lessees primarily represent some of the leading container shipping liners. Container shipping liners' recent financial performance has been relatively strong, with record high profits achieved as recently as in 2021, and another solid year of financial performance expected for 2025. While such outstanding performance may not be sustainable in the long term, it bodes well for the near- to medium-term credit performance outlook for container lessors.

(5) Structural features of this transaction trigger an accelerated principal amortization of the Offered Notes (a) if the Interest Coverage Ratio is out of compliance or (b) if credit enhancement deteriorates (Asset Base Deficiency). The Transaction also incorporates gradual scheduled deleveraging of the Offered Notes, with principal amortization switching to "full turbo" after the ARD in April 2029.

(6) Textainer's capabilities with regard to managing the fleet of marine containers. Textainer is an experienced manager of marine container lease collateral, having started operations in 1979. Textainer has 13 offices worldwide and maintains a network of approximately 400 independent depot facilities in major port areas and inland locations around the world to perform services such as container storage, maintenance, repairs, handling and inspection.
-- Morningstar DBRS has performed an operational review of Textainer and considers the entity to be an acceptable manager of the marine container leasing fleet as well as servicer for this transaction.

(7) The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns March 2025 Update, published on March 26, 2025. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

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

Morningstar DBRS' credit ratings on the Offered Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the associated Note Interest Payment, Aggregate Note Principal Balance, and interest on unpaid interest.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. The associated contractual payment obligations that are not financial obligations are related Indemnities by the servicer to the noteholders, Additional Interest, and Default Interest.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in US dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating Marine Container Securitizations (August 6, 2024) https://dbrs.morningstar.com/research/437539.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of a final credit rating on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit rating.

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

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

Rating U.S. Structured Finance Transactions (March 10, 2025)
https://dbrs.morningstar.com/research/449616

Operational Risk Assessment for U.S. ABS Originators and Servicers (March 26, 2025)
https://dbrs.morningstar.com/research/450709

Legal Criteria for U.S. Structured Finance (December 3, 2024)
https://dbrs.morningstar.com/research/444064

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

Ratings

TMCL VII Holdings Limited
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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