Securitizing Transportation and Other Operating Assets

Abstract

This article discusses “operating asset securitizations,” i.e., securitizations of discrete, tangible physical assets such as railcars, shipping containers, rental cars, and aircraft. The originators of these transactions are companies that regularly engage in the leasing of these assets to end users. A distinguishing feature of these securitizations is that the economically useful lives of the assets, and therefore the maturities of the asset-backed securities, will extend beyond the expiration dates of the leases associated with those assets. Such transactions are therefore more dependent than traditional securitizations on the servicer's ability to deploy, maintain, and re-deploy the assets over time. The author discusses some of the unique legal aspects of these transactions and how such transactions are structured to achieve bankruptcy-remote objectives notwithstanding the increased reliance on the servicer and the fact that the assets are not themselves self-liquidating.