trinity rail leasing 2019 llc (series 2019-2)€¦ · leasing businesses such as marine cargo...

Presale:

Trinity Rail Leasing 2019 LLC (Series 2019-2)October 2, 2019

Preliminary Ratings

Class Preliminary rating(i) Preliminary amount (mil. $)

A-1 A (sf) 106.9

A-2 A (sf) 279.6

Note: This presale report is based on information as of Oct. 2, 2019. The rating shown is preliminary. This report does not constitute arecommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of a final rating that differs from thepreliminary rating. (i)The rating is preliminary and subject to change at any time.

Profile

Expected closingdate

Oct 10, 2019.

Expected maturitydate

Oct. 19, 2026.

Legal final maturitydate

Oct. 18, 2049.

Optional redemption Subject to certain restrictions, the class A notes can be redeemed in whole or in part one year afterclosing at a price equal to their outstanding principal balance, their accrued and unpaid interest, andany applicable redemption premium.

Collateral A $1,176,959,815.33(i) portfolio containing 13,426 railcars. This combined fleet backs the series2019-1 and 2019-2 notes. The issuer has the right to lease revenues from the portfolio and anyresidual cash flows from the sale of the railcars.

Issuer Trinity Rail Leasing 2019 LLC.

Servicer Trinity Industries Leasing Co.

Indenture trustee U.S. Bank N.A

Liquidity provider Landesbank Hessen-Thüringen Girozentrale (Helaba).

(i)Incorporates the total adjusted values, as of Sept. 17, 2019, of the existing railcars and the initial appraised values of the railcars anticipatedto be acquired by the issuer on the closing date.

Presale:

Trinity Rail Leasing 2019 LLC (Series 2019-2)October 2, 2019

PRIMARY CREDIT ANALYST

Steven Margetis

New York

(1) 212-438-8091

[email protected]

ANALYTICAL MANAGER

Kate R Scanlin

New York

(1) 212-438-2002

[email protected]

CORPORATE & GOVERNMENT CREDITANALYST

Betsy R Snyder, CFA

New York

(1) 212-438-7811

[email protected]

RESEARCH ASSISTANT

Matthew S Gardener

New York

www.standardandpoors.com October 2, 2019 1

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimeron the last page.

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mailto: [email protected]






Rationale

The preliminary ratings assigned to Trinity Rail Leasing 2019 LLC's (the issuer's) class A-1 and A-2fixed-rate secured railcar equipment notes series 2019-2 reflect:

- The likelihood that timely interest and ultimate principal payments will be made on or beforethe legal final maturity date,

- The initial and future lessees' estimated credit quality,

- The railcar collateral's value and rental-generating potential,

- The transaction's legal and payment structures,

- The demonstrated servicing ability of Trinity Industries Leasing Co., and

- The liquidity facility, which will have an available advance amount of up to nine months'interest.

Transaction Overview

Strengths

The transaction's strengths include the following:

- The railcar leasing market's historical stability and relatively high and stable utilization rates.

- The minimal risk of technical obsolescence and the equipment's long useful life.

- The young age of the railcars included in the portfolio, with an average of 7.7 years;

- The railcars' low and, for the most part, fixed maintenance due to their relative youth;

- The low write-offs; and

- The diversified pool of tank and non-tank freight cars.

Weaknesses

The transaction's weaknesses include the following:

- Most (76.6%) of the initial leases are full-service, which exposes the transaction to the railcars'uncertain variable expenses, such as maintenance.

- 32.6% (based on the number of railcars) of the lessees are not rated by S&P Global Ratings and11.9% are rated speculative grade ('BB+' or lower).

- Low oil prices have put pressure on the re-lease rates of tank cars carrying crude oil.

Mitigating factors

The following factors mitigate transaction's weaknesses:

- The railcars generally have a useful life of 35 years or more.



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Presale: Trinity Rail Leasing 2019 LLC (Series 2019-2)

- Our stress scenarios include stresses to the expenses due on the portfolio's full-service leases.

- The stress scenarios we apply to the utilization rates can typically incorporate up to 42% lesseedefaults during the lease term for a five-year operating lease that is subject to six months ofdowntime in between lessees.

- We apply stress scenarios to the cash flow modeling for fleet utilization, lease rates, andoperating expenses through four four-year sector downturns.

Industry Characteristics And Sector Outlook

Key characteristics of the railcar leasing industry include:

The industry is somewhat concentrated, with only a few major participants and several smallerones.

Railcar leasing is typically a stable and predictable cash flow source (because of multiyear leasesand relatively high-quality lessees), compared with certain other transportation equipmentleasing businesses such as marine cargo container leasing.

Railroad companies and shippers typically choose not to invest in tank cars, so lessors own about75% of tank cars in the U.S.

In 2016, railcar carloads declined 8.2%, primarily due to less demand for commodities such ascoal and petroleum products, while in 2017 they increased 4.8%, primarily due to an increase inchemicals and intermodal traffic. In 2018, North American carloads rose by 2.0%, driven by anincrease in petroleum and petroleum products. In the first 38 weeks of 2019, U.S. railroadsreported cumulative volume declined by 3.6%. North American carloads decreased by 0.2%year-over-year, with strong performance again reported in petroleum and petroleum products. Alarge percentage of lessees are rated investment-grade ('BBB-' or higher) with low-credit losses.

The railcar manufacturers include Trinity Industries Inc., Greenbrier (which acquired AmericanRailcar Industries in July 2019), Union Tank Car Co., FreightCar America, and National Steel Car.

The railcar lessors include Greenbrier, Union Tank Car Co., Chicago Freight Car Leasing, CIT RailcarFunding Co., GATX Corp., TTX Co., Trinity Industries Leasing Co. (TILC), The Andersons Rail Group,Wells Fargo Rail, American Railcar Leasing, SMBC Rail Services LLC (formerly known as FlagshipRail Services; it acquired some of the assets of American Railcar Leasing LLC in June 2017), andCAI Rail (which is in the process of divesting its fleet).

Demand for certain railcars, such as boxcars, is highly cyclical.

S&P Global Ratings expects U.S. GDP growth of 2.3% in 2019 and 1.7% in 2020, which shouldcontribute to demand for certain car types, especially those that transport chemicals andhousing-related products. However, weaker international trade growth, based on concerns abouttrade tariffs, pushed intermodal traffic lower in 2019 than in 2018, although it has been increasingsince May. Total combined U.S. traffic for the first 38 weeks of 2019 was 19,724,836 carloads andintermodal units, a 3.8% decline compared with last year. We expect oil prices of around $55 abarrel through 2020, which could cause pressure on demand and lease rates for cars thattransport crude as it becomes less economical to produce and refine.

Leasing companies provide most of the tank cars in service, and shippers own the remainder.Because of the shortage of tank cars through 2014, lessors had been able to securelonger-than-typical lease terms (10 years, rather than the normal four to seven) and higher rates.However, many of these are beginning to come up for renewal, which we expect will be renewed at



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lower lease rates.

Even with weaker demand, the contracts' terms make it difficult to return cars early, which shouldkeep utilization, revenues, and cash flows fairly stable over the next several years. However, leaserates for other cars that have been re-leased have been at substantially lower rates with shorterlease terms. Lessors can also reduce capital spending to add to their fleets (and thus maintainutilization levels) and write shorter lease terms at lower lease rates, with the expectation that theywill be able to increase rates when stronger demand returns. Over the longer term, we expect theNorth American railroads' focus on precision scheduled railroading, which results in improvedoperating efficiency and the need for fewer railcars, to hurt demand.

In addition, there has been some consolidation in the sector:

- On Sept. 30, 2015, General Electric Railcar Services LLC sold a portion of its tank car fleet toUnion Tank Car Co., which was already the largest tank car lessor

- In first-quarter 2016, General Electric Railcar sold the remainder of its of its tank car fleet toWells Fargo Rail, which is owned by the bank Wells Fargo & Co., another large U.S. railcarlessor.

- On June 1, 2017, SMBC Rail Services LLC completed its acquisition of most of American RailcarLeasing LLC's assets.

- On Dec. 5, 2018, ITE Management L.P. completed its acquisition of the remainder of AmericanRailcar Industries Inc.'s assets.

- In addition, CAI Rail has announced that it is selling its railcar leasing fleet.

The industry isn't exempt from regulation though. After a spate of accidents involving tank carstransporting crude oil, the U.S. Department of Transportation (DOT) unveiled new tank carregulations in May 2015 and implemented them two months later. However, many of theregulations regarding retrofitting or replacing older tank cars will take many years to phase in. Inthe meantime, with weaker demand, many of the older cars have been scrapped, which we expectto continue, and some of the costs of the newer cars to be retrofitted will be passed on to thelessees through lease rates. None of issuer's fleet tank cars are expected to be subject to retrofitrequirements.

Transaction Structure

Trinity Rail Leasing 2019 LLC is a bankruptcy-remote limited-liability company organized underthe laws of Delaware. The issuer is a wholly owned special subsidiary of TILC. The issuer'sbusiness is limited to owning railcars, leases, and related assets.

The series 2019-2 notes is the second series of notes issued out of this trust. The first, series2019-1, was issued in April 2019.

The issuer will purchase in a true sale a portfolio of railcars and their related leases from TILC, therailcar manager, and from Trinity Rail Leasing Warehouse Trust (TRLWT). The issuer will then granta security interest in the leased railcars and leases, along with the rights under the relatedagreements and accounts, to the indenture trustee for the bondholders' benefit. According to thedata we have been provided, the issuer will own 13,428 railcars, bringing the expected adjustedvalue of the underlying pool of railcars to $1,177,084,454, which includes the Sept. 17, 2019,adjusted values of the existing railcars and the initial appraised values of the railcars to beacquired on the closing date.



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The trustee will pay principal and interest due on the notes from the payments that the underlyinglessees make, the earnings from any invested funds, the proceeds from any railcar dispositions,the insurance proceeds, and the amounts on deposit in the specified cash accounts (see chart 1for the transaction structure).

Chart 1

Administrator/Servicer

TILC, a wholly owned subsidiary of Trinity Industries Inc. (Trinity), was incorporated under Texaslaw in 1979 and serves as the servicer and administrator for the transaction.

Trinity is a leading North American designer and manufacturer of tank and non-tank freightrailcars. On Nov. 1, 2018, Trinity completed a spinoff of its infrastructure-related business as aseparate business, named Arcosa Inc. As a result of the spinoff, Trinity is now solely focused onoperating its integrated rail manufacturing, leasing, and services businesses together with its



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highway products and logistics businesses.

TILC leases tank cars and non-tank freight cars to industrial companies in petroleum, chemical,agricultural, energy, and other industries. TILC also manages railcar equipment for third-partyowners.

As of June 30, 2019, TILC's managed fleet consisted of approximately 102,139 railcars, including77,512 railcars owned by TILC or managed for Trinity's wholly owned special-purpose subsidiaries.The fleet utilization rate was 97.8% as of June 30, 2019.

TILC's owned and managed fleet is one of the largest among the top railcar operating lessors,which include GATX Corp., Union Tank Car Co., CIT Rail Resources, Wells Fargo Rail, The GreenbrierCos., and SMBC Rail Services LLC.

Portfolio Characteristics

The issuers' portfolio includes approximately 13,426 railcars. The portfolio includes 76.61%full-service leases and 17.79% net leases (by number of rail cars). See table 1 for a portfoliobreakdown by railcar type as of Aug 31, 2019.

Table 1

Portfolio Breakdown By Railcar Type

Car type No. of railcars % of total

Freight 7,110 52.96

Tank 6,316 47.04

Total 13,426 100.00

The portfolio is relatively young: the weighted average age by car count is 7.7 years. The 13,426railcars are a diversified mix of freight and tank cars, with leases expiring during the next seven to180 months as of December 2018 (see table 2). In most cases, our assumed lease rate factor forthe cars is less than the actual lease rate factor. This results in a lower assumed rent once thecurrent lease expires. We assume the railcars are sold at a fraction of their depreciated value atthe end of their useful lives (see the Cash Flow Assumptions section). A railcar's useful life istypically 30 years to 50 years, which is longer than the transaction's 30-year life.

Table 2

Portfolio Stratification By Manufacture Year

Year of manufacture No. of railcars % of total(i)

1991 2 0.01

1992 5 0.04

1993 4 0.03

1994 10 0.07

1995 46 0.34

1996 43 0.32

1997 129 0.96

1998 267 1.99

1999 90 0.67



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Table 2

Portfolio Stratification By ManufactureYear (cont.)

Year of manufacture No. of railcars % of total(i)

2000 373 2.78

2001 506 3.77

2002 306 2.28

2003 1,152 8.58

2004 1,245 9.27

2005 82 0.61

2006 366 2.73

2007 405 3.02

2008 422 3.14

2009 27 0.20

2010 1 0.01

2011 1 0.01

2012 22 0.16

2013 149 1.11

2014 213 1.59

2015 899 6.70

2016 1,002 7.46

2017 949 7.07

2018 3,215 23.95

2019 1,495 11.14

Total 13,426 100.00

(i)Amounts may not total due to rounding.

The demand for specialty railcars is typically based on overall economic growth; the growth ofcertain industry segments, such as manufacturing and shipping; and the replacement of olderequipment. Of all the railcar types, tank car leasing has historically been the most stable andpredictable cash flow source. Their lease terms average more than four years, and, in many cases,the equipment stays with a single lessee for its entire life, which results in utilization rates of morethan 90% throughout economic cycles. The commodities these cars transport tend to be lessaffected by economic cycles than other commodities. To counter the lower demand for specialtyrailcars in economic downturns, lessors tend to shorten lease terms with lower lease rates tomaintain strong utilization levels. This allows lessors to extend lease terms at higher rates whendemand recovers.

We believe the transaction's closing date portfolio services a diverse mix of industries (see table 3for a portfolio breakdown by industry).



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Table 3

Portfolio Stratification By Industry Served

Industry type No. of railcars % of total(i)

Aggregates 273 2.03

Autos 728 5.42

Biofuels 664 4.95

Cement 436 3.25

Chlor-alkali 718 5.35

Coal 866 6.45

Construction materials 13 0.10

Crude oil 575 4.28

DDG/feed 530 3.95

Fertilizer 430 3.20

Food and other Ag 625 4.66

Frac sand 827 6.16

Grain 135 1.01

Grain mill products 970 7.22

Lumber 542 4.04

Metal products 19 0.14

NGL 1,038 7.73

Other 36 0.27

Other chemical 770 5.74

Other consumer products 234 1.74

Other metals 7 0.05

Paper 304 2.26

Petrochemicals 735 5.47

Plastics 1,194 8.89

Refined products 209 1.56

Steel/iron 55 0.41

Sulfur products 493 3.67

Total 13,426 100.00


On the closing date, we expect the largest lessee will account for approximately 4.2% (by units) ofthe total railcars leased. Railcars leased to the 10 largest lessees account for approximately30.5% (by units) of the total railcars leased. A lessee default could increase the portion of railcarsthat may need to be remarketed because of repossession. Based on the current portfoliocomposition by lessee (as measured by the number of railcars), 55.5% are rated investment grade,11.9% are rated speculative grade, and 32.6% are not rated.

Generally, once a lessee defaults, TILC would have to repossess the railcars and remarket them.We performed a sensitivity analysis of the utilization rate to address the risk that the issuers



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would not receive cash flow during the downtime. The stress level we apply to the utilization ratecan incorporate 42% lessee defaults during the lease term as shown in the Cash Flow Resultssection of this report (see table 4 for a summary of the portfolio lessee distribution ratings).

Table 4

Portfolio Lessee Stratification By S&P Global Ratings

Rating No. of railcars % of total(i)

AAA 11 0.08

AA+ 24 0.18

AA- 830 6.18

A+ 748 5.57

A 987 7.35

A- 817 6.09

BBB+ 1,397 10.41

BBB 1,399 10.42

BBB- 1,241 9.24

BB+ 171 1.27

BB 592 4.41

BB- 159 1.18

B+ 194 1.44

B 78 0.58

B- 291 2.17

CCC 116 0.86

NR 4,371 32.56

Total 13,426 100.00

(i)Amounts may not total because of rounding. NR--Not rated.

TILC establishes each lease's rate when its term begins. After the initial lease terms have expired,the leases generally continue on the same terms on a month-to-month basis. The servicer willestablish renewal lease rates for those railcars on which the related lease is renewed. Renewallease rates are typically based on the initial lease rate, the railcar industry's strength, customerdemand, and the applicable railcar's age and expected useful life. Tables 5-7 outline the portfoliostratifications by lease rate, lease term, and against peers.

Table 5

Portfolio Stratification By Lease Rate Range

Monthly lease rates ($) No. of railcars % of total(i)

Less than $500 4,588 34.17

$500 to 599 2,887 21.50

$600 to 699 1,696 12.63

$700 to 799 1,063 7.92

$800 to 899 291 2.17



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Table 5

Portfolio Stratification By Lease Rate Range (cont.)

Monthly lease rates ($) No. of railcars % of total(i)

Over $900 2,149 16.01

Per diem 752 5.60

Total 13,426 100.00

(i)Amounts may not total because of rounding.

Table 6

Portfolio Stratification By Remaining Lease Term

Remaining lease term (months) No. of railcars % of total(i)

Less than 12 616 4.59

12-23 1,794 13.36

24-35 1,643 12.24

36-47 2,421 18.03

48-59 2,408 17.94

60-71 792 5.90

72-83 1,173 8.74

84-95 78 0.58

96-107 708 5.27

108-120 1,070 7.97

Greater than 120 723 5.39

Total 13,426 100.00


Table 7

Comparison With Recent Transactions

Trinity RailLeasing 2019

LLC (Series2019-2)

NP SPE IX2019-1


LLC (Series2019-1)


LLC

USQ Rail ILLC (Series

2018-1)

Element RailLeasing II LLC

(Series 2016-1)

No. of railcars 13,426 3,489 8,003 7,090 3,207 8,578

Average age (years) 7.74 5.92 7.42 5.09 7.1 3.7

Average remaining leaseterm (years)

4.74 4.25 5.29 5.70 5.2 4.7

Average monthly leaserate ($)

662.63 691.00 627.83 654.00 858.8 931.0

% of tank cars 47.04 47.84 42.85 38.00 46.5 51.3

Largest lessee (%)(i) 4.20 5.00 5.20 8.50 7.8 8.6

% investment-gradelessees

55.52 47.06 58.50 50.49 37.7 41.5



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Table 7

Comparison With Recent Transactions (cont.)


LLC (Series2019-2)

NP SPE IX2019-1


LLC (Series2019-1)


LLC

USQ Rail ILLC (Series

2018-1)

Element RailLeasing II LLC

(Series 2016-1)

Largest industry (%) 8.89 25.74 11.12 16.90 19.1 28.3

(i)By number of railcars.

None of the cars in the pool are expected to be subject to retrofitting.

Cash Flow Assumptions

The transaction's cash flows depend on a number of key inputs, some of which are contractual(e.g., lease rates) and some of which we modeled based on historical performance, our economicscenarios, and our expectation of the railcars' lifespan. We have incorporated the stresses foreach of those components into four sector downturns (each of which is four years long) during thefleet's life. The downturns' depth, length, and starting time are rating-dependent, meaning ahigher rating is subject to deeper and longer downturns within a shorter time frame.

Our internal cash flow model includes input assumptions for the following:

- The railcars' lease rates and terms by car type;

- The railcars' depreciation schedule by car type;

- The railcars' maintenance schedule by car type;

- The base fees and write-off assumptions;

- The inflation rate for rent, maintenance, and other expenses; and

- The railcars' residual value ranges from 0%-10% at the end of the transaction.

In addition, our internal cash flow model includes input assumptions for the following economicconditions:

- Years 1-4: recession;

- Years 5-9: normal economic conditions;


- Years 14-18: normal economic conditions;


- Years 23-27: normal economic conditions; and

- Years 28-31: recession.

Under our stress assumptions, we expect that the transaction will pay timely interest on eachpayment date and full principal by the final maturity date. We have stressed and changed four ofthese aforementioned inputs during the transaction's life. We adjusted our assumptions for thevalue of these inputs to stress the transaction at a level that we believe is commensurate with ourassigned preliminary ratings.



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Utilization Rates

Based on our 'A' assumptions, fleet utilization levels during any of the downturns step down to70%-75% and then recover. During a four-year downturn, we assumed that the utilization at thebeginning (year one) and end (year four) of the downturn was halfway between the bottom andbase levels. During the recent sector downturn, U.S. fleet utilization briefly dipped below 70%. Inour view, stressing the utilization rate at similar levels for two years is commensurate with an 'A'rating stress level.

Fleet utilization is generally a function of several operating parameters, including lease term,downtime in transit between lessees, and lessee default assumptions. For example, for a five-yearoperating lease that is subject to six months of downtime in between lessees, 76% utilization cantypically incorporate 42% lessee defaults during the lease term (see chart 2).

Chart 2

Lease Rates

We model future lease rates based on a "lease rate factor curve," which converts a railcar's valueto the corresponding lease rentals using a factor that changes (one that typically increases) overtime. To determine this calculation, we begin with the appraised value provided by a third-partyappraiser, RailSolutions Inc. in this case. We model the car depreciation by applying a constantcompound factor of 6% to freight cars and 7% to tank cars. We forecast the lease rates, includingan inflation factor, using this model as our base case. For our stress tests, we reduce thebase-case lease rates by 30%-35% for the 'A' rating level. Similar to how we model fleetutilization, we "step down" to halfway between the base and low during years one and four of eachdownturn (see chart 3).



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Chart 3

Useful Life And Residual Proceeds

Railcars typically have a useful life of approximately 30 years to 50 years, depending on the cartype. For the purposes of modeling, we assume that all railcars have a 35-year useful life. At theend of the useful life, we assume that the railcars are sold at a haircut commensurate with thelease rate stress. We determine the book value by depreciating the initial railcar value by railcartype. We use the fair market value and the depreciated original equipment cost, respectively, forthe initial value in our two rating runs.

Although most of the cash flow comes from lease rentals, we assume a modest residual value ofaround 10% at the end of a railcar's useful life.

Operating Expenses

Operating expenses include maintenance, storage, insurance, and taxes for the portion of the fleeton full-service leases. During a downturn, companies often return cars more frequently, whichleads to increased maintenance expenses. Lower U.S. fleet utilization has reduced congestion andincreased the leased cars' speed and mileage. In addition, railroad operators have increasinglydeployed wheel sensors to detect possible damages and have been removing cars from theoperating fleet for wheel replacement more proactively than in the past. This has also increasedmaintenance expenses, which we have incorporated into our cash flow model.

For our base-case modeling, we adjusted the railcars' maintenance costs so that they were in linewith the utilization rate, assuming that unleased railcars require minimal maintenance. Wegenerally inflate expenses by 2.0%-2.5% per year. During a downturn, we stress operatingexpenses by 25%-30% for the 'A' rating stress level. Similar to how we model utilization and lease



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rates, this stress "steps up" halfway to the peak of 25% during the first and last year of eachdownturn we model.

Cash Flow Results

We ran a number of stress tests where cash flow is put through sector downturns when both fleetutilization and re-leasing rates decrease and operating expenses increase. The magnitude of thestresses is rating-dependent.

To decrease the volatility in forecasting lease rates, which results from fluctuations in the fairmarket value of railcars, in our rating analysis, we use the fair market value of railcars (see table 8)and the depreciated original equipment cost (OEC) estimated by RailSolutions (see table 9) as theinitial railcar value.

Under the depreciated OEC approach, we developed a lease rate factor curve (expressed as apercentage of the depreciated OEC), based on lease rate data going back as far as 1980.

Table 8

Cash Flow Results--Fair Market Approach(i)

Description Stress modeled

Noteholders are paid in fullwith what maximumhaircut/cost increase?

'A' stress case Cut utilization to 76% and reduce the base-case lease rates by 30%-75%while increasing the operating expense by 25% during four sectordownturns; depreciate starting values by 6%-7% for residual values, withadditional stress during a recession; fair market value for the initial railcarvalue; and express lease rate factor curve based on fair market value.

Timely interest and ultimateprincipal are paid to theclass A noteholders

(i)Using Trinity's appraised value and S&P Global Ratings' lease rate factor curve based on fair market value.

Table 9

Cash Flow Results--Original Equipment Cost Approach(i)

Description Stress modeled

Noteholders are paid in fullwith what maximumhaircut/cost increase?

'A' stress case Cut utilization to 76% and reduce the base-case lease rates by30%-75% while increasing the operating expense by 25% during foursector downturns; depreciate starting values by 6%-7% for residualvalues, with additional stress during a recession; depreciate OEC for theinitial railcar value; and express lease rate factor curve based on OEC.

Timely interest and ultimateprincipal are paid to theclass A noteholders

(i)Using S&P Global Ratings' depreciated value from OEC and new lease rate factor curve based on OEC. OEC--Original equipment cost.

Sensitivity Analysis

Break-even scenarios and sensitivity analyses

We performed certain sensitivity analyses, such as break-even scenarios, where we held certainstress assumptions constant and increased the stress based on a single factor, includingutilization or re-leasing rates.



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Based on our results (see tables 10 and 11), we believe the transaction can withstand a furtherincrease of utilization or re-leasing rate stress, holding everything else constant, before it fails topay the full principal amount at legal final maturity.

Table 10

Sensitivity Scenarios--Fair Market Value Approach 'A'(i)

Description Stress modeledNoteholders are paid in full with whatmaximum haircut/cost increase?

Utilization break-even('A')

Same as the 'A' stress case listed in table 8 butincreasing the utilization stress until the notes wouldnot be paid in full.

23% additional stress for the class Anotes

Re-leasing ratebreak-even ('A')

Same as the 'A' stress case listed in table 8 butincreasing the lease rate stress until the notes wouldnot be paid in full.


(i)Using Trinity's appraised value and S&P Global Ratings' lease rate factor curve based on fair market value.

Table 11

Break-Even Scenarios--Original Equipment Cost(i)

Description Stress modeledNoteholders are paid in full with whatmaximum haircut/cost increase?

Utilization break-even('A')

Same as the 'A' stress case listed in table 9 butincreasing the utilization stress until the notes wouldnot get paid in full


Re-leasing ratebreak-even ('A')

Same as the 'A' stress case listed in table 9 butincreasing the lease rate stress until the notes wouldnot get paid in full


(i)Using S&P Global Ratings' depreciated value from OEC and new lease rate factor curve. OEC--Original equipment cost.

Payment Priority

The class A notes are fixed-rate notes. On each monthly payment date, as long as no event ofdefault has occurred and is continuing, according to the transaction's documents, the funds willbe distributed in the payment priority shown in table 12.

Table 12

Payment Waterfall(i)

Priority Payment

1 Pro rata, required expense amount and the required expense deposit.

2 Service provider fees to the service providers.

3 Repay servicer advances.

4 Pay pro rata: all current and past due interest on the class A notes other than current or past dueadditional interest, interest owed to the liquidity facility provider, senior hedge payments, andindemnifications to the liquidity facility provider, provided that the liquidity facility may only bedrawn to pay the first and third items.

5 Repay any drawn amounts the liquidity facility provider and then to the liquidity account until thebalance is equal to the liquidity reserve target amount.



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Table 12

Payment Waterfall(i) (cont.)

Priority Payment

6 The scheduled principal payment amount currently due on the class A notes: to the earliest issuedseries and then to each subsequent series in chronological order of issuance; and, within eachseries, to each class sequentially in ascending numerical designation of each class but pro rataamong any alphabetical subclasses of the same class.

7 Reimburse the servicer for optional modifications made, capped at 2.00% of the initial appraisedvalue of the portfolio.

8 If a rapid amortization event (but no early amortization event) has occurred, pay the class A notes'unpaid principal balance sequentially to the earliest issued rapid amortizing series and then to eachsubsequent rapid amortizing series in chronological order of issuance; and, within each rapidamortizing series, to each class sequentially in ascending numerical designation of each class butpro rata among any alphabetical sub-classes of the same class.

9 If an early amortization event is ongoing, to the class A notes' unpaid principal balance pro rata.

10 All current and past due interest on the class B notes other than current or past due additionalinterest.

11 The scheduled principal payment amount currently due on the class B notes: to the earliest issuedseries and then to each subsequent series in chronological order of issuance; and, within eachseries to each class, sequentially in ascending numerical designation of each class but pro rataamong any alphabetical sub-classes of the same class.

12 If a rapid amortization event (but no early amortization event) has occurred, pay the class B notes'unpaid principal balance sequentially to the earliest issued rapid amortizing series and then to eachsubsequent rapid amortizing series in chronological order of issuance; and, within each rapidamortizing series, to each class sequentially in ascending numerical designation of each class butpro rata among any alphabetical subclasses of the same class.

13 If an early amortization event is ongoing, to the class B notes' unpaid principal balance pro rata.

14 All current and past due additional interest on the class A notes.

15 All current and past due additional interest on the class B notes.

16 The class A notes' redemption premium, pro rata.

17 The class B notes' redemption premium, pro rata.

18 Any subordinated hedge payments.

19 Any of the issuer's indemnities to the initial purchasers of the existing notes and additional notes.

20 Pay or reimburse the issuer for the optional modification costs.

21 The remaining proceeds to the issuer.

(i)There is a provisionfor class B notes ifthey are issued.

Payment priority after an event of default

If an event of default occurs, collections will be distributed according to the payment priorityoutlined in table 13.



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Table 13

Payment Waterfall After An Event Of Default(i)

Priority Payment

1 Pro rata, the required expense amount and the required expense deposit.

2 Service provider fees to the service providers.

3 Repay servicer advances.

4 Pro rata based on the amount due: all current and past due interest on the class A notes other thancurrent or past due additional interest, interest owed to the liquidity facility provider, senior hedgepayments, and indemnifications to the liquidity facility provider, provided that the liquidity facilitymay only be drawn to pay the items 1 and 3 above.

5 The class A notes' outstanding principal balance, pro rata.

6 Pay or reimburse the servicer for the optional modification costs.

7 Pro rata based on the amount due: all current and past due interest on the class A notes other thancurrent or past due additional interest

8 The class B notes' outstanding principal balance, pro rata.

9 All current and past due additional interest on the class A notes.

10 All current and past due additional interest on the class B notes.

11 The class A notes redemption premium, pro rata.

12 The class B notes redemption premium, pro rata.

13 Any subordinated hedge payments, pro rata.

14 Any of the issuer's indemnities to the initial purchasers of the existing notes and the additional notes.

15 To pay or reimburse the issuer for the optional modification costs.


(i)There is a provisionfor class B notes ifthey are issued.

On each payment date, as long as no event of default has occurred and is continuing, if the netdisposition proceeds have been transferred to the collections accounts, the balance in eitheraccount should be applied in the following priority (see table 14).

Table 14

Payment Waterfall After Railcar Disposition(i)

Priority Payment

1 Pro rata, required expense amount and the required expense deposit.

2 Pro rata, to meet the liquidity reserve target amount and principal and other amounts due to the liquidityfacility providers.

3 Pro rata, pay the allocable note balances of the portfolio railcars (capped at the notes' outstandingprincipal balance) sequentially to class A notes in order of issuance, and within each series by ascendingnumeric order among any numerical subclasses of the class A notes in the same series but pro rataamong any alphabetical subclasses of the same class until paid in full; and then to the class A notes inorder of issuance, and within each series by ascending numeric order among any numerical subclasses ofthe class B notes in the same series but pro rata among any alphabetical subclasses of the same classuntil paid in full; and then senior hedge payments.

4 Pay or reimburse the servicer for the optional modification costs.

5 Class A redemption premium.



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Table 14

Payment Waterfall After Railcar Disposition(i) (cont.)

Priority Payment

6 Rapidly amortizing class A notes' outstanding principal balance (after paying item 3 above), sequentiallyamong each rapid amortizing series in order of issuance; and then within each rapid amortizing series toeach class sequentially in numerical order but pro rata among any alphabetical subclasses of the samenumerical class, provided no early amortization event has occurred or is continuing.

7 If an early amortization event has occurred and is continuing, pay the class A notes' outstanding principalbalance after paying item 3, pro rata.

8 Class B redemption premium.

9 Rapidly amortizing class B notes' outstanding principal balance (after paying item 3), sequentially amongeach rapid amortizing series in order of issuance; and then within each rapid amortizing series to eachclass sequentially in numerical order but pro rata among any alphabetical subclasses of the samenumerical class, provided no early amortization event has occurred or is continuing.

10 If an early amortization event has occurred and is continuing, pay the class B notes' outstanding principalbalance after paying item 3, pro rata.

11 Any subordinated hedge payments, pro rata.

12 Any of the issuer's indemnities to the initial purchasers of the existing notes and the additional notes.

13 To pay or reimburse the issuer for the optional modification costs.


(i)There is aprovision forclass B notes ifthey are issued.

Chart 4 shows the class A notes' scheduled target principal balances.

Chart 4



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Events Of Default

Under the transaction documents, each of the following constitutes an event of default:

- A failure to pay interest (other than additional interest) on any class A notes for five businessdays;

- A failure to pay principal or accrued and unpaid interest on any class B notes on the finalmaturity date;

- A failure to pay any other amount when due and payable on the notes if there is money availableto do so continuing for five days;

- A failure by the issuers or administrators to comply with any covenants under the operatingdocuments that has a material adverse effect on the noteholders and continues for 30 days (or60 days if the issuers have begun to remedy the failure) or more after written notice has beengiven to the issuers;

- A material breach of an issuer representation and warranty that remains uncorrected for 30days (or 60 days if the issuers have begun to remedy the breach) or more;

- The voluntary or involuntary bankruptcy of the issuer;

- A judgment of more than $1 million that is not covered by insurance is rendered against eitheror both issuers, and either enforcement proceedings have begun or a 10-consecutive-dayperiod during which a stay of enforcement will not be in effect;

- The issuer is required to register as an investment company under the Investment Company Actof 1940;

- The operative documents are found to be not valid and binding;

- The trustee is removed a servicer or an administrator, and no successor servicer oradministrator assumes the duties within 180 days;

- The trustee, acting at the direction of a majority of noteholders, provides written notice that thenotes' outstanding principal balance exceeds the railcars' adjusted value and amounts ondeposit in the optional reinvestment account and mandatory replacement account;

- A servicer materially defaults on its obligations under the marks servicing agreement and theissuer fails to exercise its right for 30 days after being informed;

- An insurance manager default has occurred and is continuing under the insurance agreement,and the issuer has failed to exercise its right for 30 days after being informed; and

- The issuer fails in its performance of certain covenants and the failure remains unremedied for30 days.

If an event of default has occurred and is continuing, the trustee can take any and all remedialactions at the written request of a majority of noteholders by principal balance.

Early And Rapid Amortization Events

Under the transaction documents, an early amortization event will occur if any of the followingevents or conditions occur on a payment date and has not been cured or waived:

- The number of railcars that are subject to a lease is less than 80% of the total number of



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railcars,

- The debt service coverage ratio is less than 1.05, or

- A servicer termination event has occurred and is continuing as a result of the rental abatementexpenses threshold.

A rapid amortization event will occur if the class A notes have not been paid in full on or before theexpected principal repayment date (November 2026).

Legal Matters

In rating this transaction, S&P Global Ratings will review the legal matters it believes are relevantto its analysis, as outlined in its criteria.

Surveillance

We use surveillance data to perform periodic reviews on all rated railcar securitizations to identifypotential and emerging trends. Our ratings reflect our opinion of the transaction's ongoing riskprofile. Our surveillance group undertakes a number of steps to determine whether the ratingsassigned to a transaction continue to reflect our view of that transaction's performance.

These steps include:

- Analyzing the servicer reports that detail the underlying collateral's performance,

- Making periodic telephone calls and holding meetings with the issuers' and servicers' keymanagement personnel to identify any emerging trends or changes in servicing standards,

- Monitoring the supporting ratings on a transaction, and

- Keeping informed of related industry developments and events that may affect a ratedtransaction's overall performance.

Our surveillance group will continue to develop and provide performance information, research,and analysis to increase the level of transparency, as well as information on our methodology,ratings, and rated transactions' performance.

Related Criteria

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation AndSpecial-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating StructuredFinance Securities: Methodology And Assumptions, Jan. 30, 2019

- Criteria | Structured Finance | ABS: North America Railcar Lease-Backed ABS Methodology AndAssumptions, June 2, 2016

- General Criteria: Global Investment Criteria For Temporary Investments In TransactionAccounts, May 31, 2012



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Related Research

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top FiveMacroeconomic Factors, Dec. 16, 2016

In addition to the criteria specific to this type of security (listed above), the following criteriaarticles, which are generally applicable to all ratings, may have affected this rating action:"Counterparty Risk Framework: Methodology And Assumptions," March 8, 2019; "Post-DefaultRatings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23,2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions,"Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D'And 'SD' Ratings," Oct. 24, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings,"Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch AndOutlooks," Sept. 14, 2009.



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