trinity rail leasing 2018 llc (series 2020-1)...presale: trinity rail leasing 2018 llc (series...

Presale:

Trinity Rail Leasing 2018 LLC (Series 2020-1)October 8, 2020

Preliminary Ratings

Class Preliminary rating Preliminary amount (mil. $)

A A (sf) 155.5

Note: This presale report is based on information as of Oct. 8, 2020. The ratings shown are preliminary. Subsequent information may result inthe assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed as evidenceof final ratings. This report does not constitute a recommendation to buy, hold, or sell securities.

Profile

Expected closingdate

On or about Oct. 19, 2020.

Expectedmaturity

June 2028.

Legal finalmaturity date

Oct. 17, 2050.

Optionalredemption

Subject to certain restrictions, the 2020-1 class A notes may be redeemed in full beginning on the July2022 payment date, at a price equal to the outstanding principal balance, together with accrued andunpaid interest thereon.

Collateral A $575,840,668 (the adjusted value as of Sept. 30, 2020) portfolio containing 6,830 railcars. Thiscombined fleet backs the $155.5 million series 2020-1 notes, as well as the 2018-1 class A-2 notes. Theissuer has the right to lease revenues from the portfolio and any residual cash flows from the sale of therailcars.

Issuer Trinity Rail Leasing 2018 LLC.

Servicer Trinity Industries Leasing Co.

Indenturetrustee

Wilmington Trust Co.

Liquidityprovider

Landesbank Hessen-Thueringen Girozentrale.

Rationale

The preliminary 'A (sf)' rating assigned to Trinity Rail Leasing 2018 LLC's $155.5 million fixed-ratesecured railcar equipment notes series 2020-1 reflect:

Presale:

Trinity Rail Leasing 2018 LLC (Series 2020-1)October 8, 2020

PRIMARY CREDIT ANALYST

Peter J Lorbiecki

Centennial

(1) 303-721-4992

[email protected]

SECONDARY CONTACTS

Steven Margetis

New York

(1) 212-438-8091

[email protected]

Jie Liang, CFA

New York

(1) 212-438-8654

[email protected]

ANALYTICAL MANAGER

Ildiko Szilank

New York

(1) 212-438-2614

[email protected]

CORPORATE & GOVERNMENT CREDITANALYST

Betsy R Snyder, CFA

New York

(1) 212-438-7811

[email protected]

www.standardandpoors.com October 8, 2020 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]










- 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 available advance amount of up to nine months' interest.

Transaction Overview

Strengths

In our view, this 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 7.6 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

In our view, this transaction's weaknesses include the following:

- The majority of the initial leases are full-service (71.5%), which exposes the transaction to therailcars' uncertain variable expenses, such as maintenance.

- We have not rated 36.6% (based on the share of unit count) of the lessees and have rated 13.1%of the lessees at a speculative-grade level ('BB+' or lower).

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

- The debt service coverage ratio (DSCR) of this portfolio was 1.09x as of Aug. 31, 2020, which isonly slightly above the early amortization trigger at 1.05x.

Mitigating factors

In our view, the transaction's weaknesses are mitigated by the following factors:

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

- 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% lessee



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Presale: Trinity Rail Leasing 2018 LLC (Series 2020-1)

defaults 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.

- The DSCR of the portfolio is expected to improve following the 2020-1 issuance, due to anexpected lower interest obligation.

Industry Characteristics And Sector Outlook

The 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 multiyearleases and relatively high-quality lessees compared with certain other transportationequipment-leasing businesses such as marine cargo container leasing.

- Railroad companies and shippers typically choose not to invest in tank cars, so lessors ownabout 75% of tank cars in the U.S.

- Major railcar manufacturers include Trinity Industries Inc.; Greenbrier, which acquiredAmerican Railcar Industries in July 2019; Union Tank Car Co.; FreightCar America; and NationalSteel Car.

- Major railcar lessors include Greenbrier; Union Tank Car Co.; CIT Railcar Funding Co.; GATXCorp.; TTX Co.; Trinity Industries Leasing Co. (TILC); Wells Fargo Rail, revised to its new name,American Railcar Leasing; and SMBC Rail Services LLC, which was formerly known as FlagshipRail Services and acquired some of the assets of American Railcar Leasing LLC in June 2017.

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

The COVID-19 pandemic has not only led to an extensive and immediate disruption in certainsectors of the economy, but has also dimmed the longer-term prospect for economic growth ingeneral. Despite the extensive and immediate disruption in certain sectors, the impact of theCOVID-19 pandemic has been far less severe on the railcar leasing market due to the long-termnature of the leases. However, the increased volatility in the global oil and gas markets has putpressure on the utilization and lease rates of railcar portfolios, especially on flammable servicetank cars used by petroleum-related businesses.

Unlike the strict restrictions that have been imposed on people's movements around the globeand the subsequent disruption in passengers' flight activities, global government policies seemoriented toward maintaining the flow of goods and commodities. In particular, lessees in therailcar pools have not experienced the near-complete interruption of business that the airlineshave faced, and the pandemic is not expected to cause an earlier retirement of the pools' physicalassets as it might for certain aircraft. For instance, the lessors in the aircraft ABS transactionsrated by S&P Global Ratings have stated that a number of their lessees have requested rentdeferrals for three to six months or expressed an inability to pay rent for the same duration. Thusfar, we have not seen such widespread deferral requests or other cash flow disruptions in therailcar ABS market. In the railcar space, the lessees represent a variety of industries and have astronger credit profile than in aircraft pools, with the average S&P Global Ratings corporate ratingtypically at or near investment grade. To date, we have not seen a significant number of corporate



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rating actions on railcar lessees, which is in contrast to the number of actions taken on aircraftlessees.

There are some early downside risks to the railcar market because the overall performance isprimarily tied to growth in the U.S. economy, which we expect to decline 4.0% in 2020 and increase3.9% in 2021. Commodity pricing is also important to the railcar leasing sector. In particular,companies related to the oil and gas sector have been under pressure because the combination ofreduced global demand and increased output from certain producers has caused a steepreduction in energy prices--a trend we expect to continue for the foreseeable future.

Over the past two years, capital expenditures on new assets have been relatively constrained inthe railcar market. Lessors have generally limited purchases and major refurbishments to thosewho have lease commitments already in place. At the same time, lease rates for cars that havebeen released have been at substantially lower rates with shorter lease terms due to weakerdemand. Lessors can reduce capital spending to add to their fleets, thus maintaining utilizationlevels, and write shorter lease terms at lower lease rates, with the expectation that they will beable to increase rates when stronger demand returns. Over the longer term, we expect the NorthAmerican railroads' focus on precision scheduled railroading, which results in improved operatingefficiency and the need for fewer railcars, to also hurt demand.

S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of thecoronavirus pandemic. The current consensus among health experts is that COVID-19 will remaina threat until a vaccine or effective treatment becomes widely available, which could be aroundmid-2021. We are using this assumption in assessing the economic and credit implicationsassociated with the pandemic (see our research here: www.spglobal.com/ratings). As thesituation evolves, we will update our assumptions and estimates accordingly.

Transaction Structure

Trinity Rail Leasing 2018 LLC (the issuer) is a bankruptcy-remote limited-liability companyorganized under the laws of Delaware. The issuer is a wholly owned special subsidiary of TrinityIndustries Leasing Company (TILC). The issuer's business is limited to owning railcars, leases, andrelated assets.

In 2018, the issuer initially purchased a portfolio of railcars and their related leases in a true salefrom TILC, the railcar manager in this transaction. The issuer then granted a security interest inthe leased railcars and leases, along with the rights under the related agreements and accounts,to the indenture trustee for the bondholders' benefit. At the time of the series 2018-1 issuance,the portfolio contained approximately 7,090 railcars. According to the data provided, the issuercurrently owns 6,830 railcars, worth approximately $575,840,668 in adjusted value as of Sept. 30,2020.

Series 2020-1 is the second issuance from this master trust, preceded by series 2018-1, whichcontained classes A-1 and A-2. The new 2020-1 class A notes will be used to redeem the 2018-1class A-1 notes; they will retain the expected repayment date (June 2028), as well as be sized toapproximately the same principal balance as the current amount outstanding on the 2018-1 classA-1 notes. In conjunction with the issuance of series 2020-1, the 2018-1 class A-1 notes will beredeemed in full. The 2018-1 class A-2 notes will remain outstanding. No new collateral will beadded to the trust in connection with the issuance of the 2020-1 notes.

One effect of this redemption and new issuance activity is an expected increase in this trust'sDSCR due to a lower amount of interest due. Between Dec. 31, 2018, and Aug. 31, 2020, the DSCRof this portfolio declined to 1.09x from 1.17x, partially due to a slight decrease in utilization, as



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well as limited bankruptcy and default activity among lessees. These bankruptcy and defaultoccurrences affect approximately 288 of the 6,830 railcars. Following the issuance of the 2020-1class A notes, the DSCR for the transaction is expected to be approximately 1.22x.

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, was incorporated under Texas law in 1979, and servesas the servicer and administrator for the transaction. Trinity is a leading North American designerand manufacturer of tank and non-tank freight railcars. TILC leases tank cars and non-tank



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freight cars to industrial companies in petroleum, chemical, agricultural, energy, and otherindustries. TILC also manages railcar equipment for third-party owners. In December 2017, Trinityannounced it was spinning off the majority of its infrastructure-related business.

As of June 2020, TILC's managed fleet consisted of approximately 130,797 railcars, including79,513 railcars owned by TILC or managed for Trinity's wholly owned special-purpose subsidiaries.The fleet utilization rate as of June 2020 was 94.7%.

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 (after its June 2017 acquisition of American Railcar LeasingLLC).

We considered operational risk related to TILC in its role as servicer for this transaction. On May22, 2020, we lowered our issuer credit rating on TILC's parent company, Trinity Industries Inc., to'BB+' from 'BBB- '(see "Trinity Industries Inc. Downgraded To 'BB+' From 'BBB-' On Lower RailVolume; Outlook Stable," published May 22, 2020). We do not expect the rating action to affectTILC's ability to perform as servicer.

Portfolio Characteristics

The issuers' portfolio includes approximately 6,830 railcars. The portfolio includes 78.2%full-service leases, 11.1% net leases, 9.1% per diem leases, and 1.5% off-lease (by unit count).Table 1 shows a portfolio breakdown by railcar type. All information regarding the issuer's fleet isas of Aug. 31, 2020.

Table 1

Portfolio Breakdown by Railcar Type

Car type No. of railcars % of total

Freight 3,822 56.0

Tank 3,008 44.0

Total 6,830 100.0

The portfolio is relatively young; the weighted average age by unit count is 7.6 years. The 6,830railcars are a diversified mix of freight and tank cars with leases expiring in the next one to 149months as of August 2020. In most cases, our assumed lease rate factor for the cars is less thanthe actual lease rate factor. This results in a lower assumed rent once the current lease expires.We assume the railcars are sold at a fraction of their depreciated value at the end of their usefullives (see the Cash Flow Assumptions section). A railcar's useful life is typically 30-50 years, whichis longer than the transaction's 30-year life (see table 2 and chart 2).



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Table 2

Portfolio Stratification By Year Of Manufacture

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

Before 1990 64 0.9

1990-1994 546 8.0

1995-1999 101 1.5

2000-2004 446 6.5

2005-2009 447 6.5

2010-2014 156 2.3

2015-2019 4,991 73.1

2020 79 1.2

(i)Amounts may not total due to rounding.

Chart 2

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 three years, and, in manycases, the equipment stays with a single lessee for its entire life, which results in utilization ratesof more than 90% throughout economic cycles. The commodities these cars transport tend to beless affected by economic cycles than other commodities. To counter the lower demand forspecialty railcars in economic downturns, lessors tend to shorten lease terms with lower leaserates to maintain strong utilization levels. This allows lessors to extend lease terms at higher rateswhen demand recovers.

We believe the transaction's closing date portfolio services a diverse mix of industries. Table 3 andcharts 3a, 3b, and 3c show a portfolio breakdown by industry.



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Table 3

Portfolio Stratification By Industry Served

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

Plastics 1,108 16.2

Frac Sand 639 9.4

Autos 599 8.8

NGL 563 8.2

Crude Oil 556 8.1

Other Chemical 426 6.2

Coal 416 6.1

Aggregates 369 5.4

Biofuels 329 4.8

Food And Other Ag 329 4.8

Fertilizer 251 3.7

Sulfur Products 242 3.5

Grain Mill Products 219 3.2

Chlor Alkali 195 2.9

Metal Products 150 2.2

Refined Products 145 2.1

PetroChemicals 128 1.9

Lumber 110 1.6

DDG/Feed 18 0.3

Cement 15 0.2

Steel/Iron 14 0.2

Grain 9 0.1

Total 6,830 100


Chart 3A



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Chart 3B Chart 3C

As of Aug. 31, 2020, there were 115 lessees in the pool. On the closing date, we expect the largestlessee will account for approximately 8.8% (by unit count) of the total railcars leased. Railcarsleased to the five-largest lessees account for approximately 31.8% (by unit count) of the totalrailcars leased. A lessee default could increase the portion of railcars that may need to beremarketed because of repossession. Based on the current portfolio composition by lessee (asmeasured by the number of railcars), 48.5% are rated investment-grade, 16.5% are ratedspeculative-grade, and 35.0% 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 issuerswould 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 Rating

Rating No. of railcars % of total(i)

AAA 599 8.8

AA 18 0.3

AA- 118 1.7

A 282 4.1

A- 201 2.9

BBB+ 739 10.8

BBB 884 12.9

BBB- 471 6.9

BB+ 225 3.3

BB 613 9.5



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Table 4

Portfolio Lessee Stratification By S&P GlobalRating (cont.)

Rating No. of railcars % of total(i)

BB- 150 2.2

B+ 30 0.4

B 24 0.4

B- 15 0.2

CCC+ 34 0.5

NR 2,427 35.0

Total 6,830 100.0

(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. As of Aug. 31, 2020, the initiallease rates for the railcars averaged $697.19 per month on a weighted average basis. In addition,the leases' weighted average remaining term was approximately 3.9 years (see tables 5-7 andcharts 4 and 5).

Table 5

Portfolio Stratification By Lease Rate Range

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

Less than $500 1,962 28.7

500-599 834 12.2

600-699 1,052 15.4

700-799 400 5.9

800-899 181 2.7

900 and greater 1,687 24.7

Per Diem 599 8.8

No Contract 115 1.7

Total 6,830 100.0


Table 6

Portfolio Stratification By Remaining Lease Term

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

Less than 12 1,182 17.3

12-23 1,045 15.3

24-35 1,116 16.3

36-47 383 5.6

48-59 420 6.1

60-71 980 14.3

72-83 732 10.7

84-95 792 11.6

96-107 0 0.0

108-119 28 0.4

120 and greater 152 2.2

Total 6,830 100.0




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Table 7

Comparison With Recent Transactions(i)

Trinity RailLeasing 2018LLC (Series2020-1)


NP SPEIX2019-1



USQ Rail ILLC(Series2018-1)

Element RailLeasing IILLC (Series2016-1)

No. of railcars 6,830 13,426 3,489 8,003 7,090 3,207 8,578

Average age (years) 7.6 7.7 5.9 7.4 5.1 7.1 3.7

Average remaininglease term (years)

3.9 4.7 4.3 5.3 5.7 5.2 4.7

Average monthlylease rate ($)

697 663 691 628 654 859 931

% of tank cars 44.0 47.0 47.8 42.9 38.0 46.5 51.3

Largest lessee (%) 8.8 4.2 5.0 5.2 8.5 7.8 8.6

% investment-gradelessees

48.5 55.5 47.1 58.5 50.5 37.7 41.5

Largest industry (%) 16.2 8.9 25.7 11.1 16.9 19.1 28.3

(i)% by number of railcars.

Chart 4



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Chart 5

Of the 6,830 cars in this pool, only 30 cars are expected to be subject to retrofitting requirements.These cars are modeled as being retrofit within the first year of the transaction.

Cash Flow Assumptions

The transaction's cash flows depend on a number of key inputs, some of which are contractual (forexample, lease rates) and some of which we modeled based on historical performance, oureconomic scenarios, and our expectation of the railcars' lifespan. We have incorporated thestresses for each of those components into four sector downturns (each of which is four yearslong) during the fleet's life. The downturns' depth, length, and starting time are rating-dependent,meaning a higher 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 writeoff assumptions;

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



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- 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.

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 6).



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Chart 6

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 6%constant compound factor to freight cars and 7% to tank cars. We forecast the lease rates,including an 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 7).



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Chart 7

Useful Life And Residual Proceeds

Railcars typically have a useful life of approximately 30-50 years depending on the car type. Forthe purposes of modeling, we assume that all railcars have a 35-year useful life. At the end of theuseful life, we assume that the railcars are sold at a haircut commensurate with the lease ratestress. We determine the book value by depreciating the initial railcar value by railcar type. We usethe fair market value and the depreciated original equipment cost, respectively, for the initialvalue in our two rating runs.

Although most of the cash flow comes from lease rentals, we do assume a modest residual valueof around 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 leaserates, this stress "steps up" halfway to the peak of 25% during the first and last year of eachdownturn we model.



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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 as the initial railcar value--in addition to thefair market value of railcars (see table 10)--the depreciated original equipment cost (OEC)(seetable 11). Under the depreciated OEC approach, we developed a lease rate factor curve (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 arepaid in full withwhat maximumhaircut/costincrease?

'A' stress case Cut utilization to 76% and reduce thebase-case lease rates by 30%-75%while increasing the operating expenseby 25% during four sector downturns;depreciate starting values by 6%-7%for residual values, with additionalstress during a recession; fair marketvalue for the initial railcar value; leaserate factor curve based on fair marketvalue;

Timely interest andultimate principalare paid to the classA noteholders

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

Table 9

Cash Flow Results--Original Equipment CostApproach(i)


Noteholders arepaid in full withwhat maximumhaircut/costincrease?

'A' stress case Cut utilization to 76% and reduce thebase-case lease rates by 30%-75%while increasing the operating expenseby 25% during four sector downturns;depreciate starting values by 6%-7%for residual values, with additionalstress during a recession; depreciateOEC for the initial railcar value; leaserate factor curve based on OEC.

Timely interest andultimate principalare paid to the classA noteholders

(i)Using S&P Global Ratings' depreciated value from OEC and new lease rate factor curvebased 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.

Based on our results (see tables 10 and 11), we believe that the transaction can withstand afurther increase of utilization or re-leasing rate stress and holding everything else constant beforethe transaction fails to pay the full principal amount at legal final maturity.



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Table 10

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


Noteholders are paid infull with what maximumhaircut/cost increase?

Utilizationbreak-even ('A')

Same as the 'A' stress caselisted in table 9 but increasingthe utilization stress until thenotes would not get paid infull.

23% additional stress forthe class A notes

Re-leasing ratebreak-even ('A')

Same as the 'A' stress caselisted in table 9 but increasingthe lease rate stress until thenotes would not get paid infull.

26% additional stress forthe class Anotes

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

Table 11

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


Noteholders are paid infull with what maximumhaircut/cost increase?

Utilizationbreak-even ('A')

Same as the 'A' stress caselisted in table 10 butincreasing the utilizationstress until the notes wouldnot get paid in full


Re-leasing ratebreak-even ('A')

Same as the 'A' stress caselisted in table 10 butincreasing the lease ratestress 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

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 Pro rata; first, all current and past due interest on the class A notes other than current or past due additionalinterest; second, interest owed to the liquidity facility provider; third, senior hedge payments; and fourth,indemnifications to the liquidity facility provider, provided that the liquidity facility may only be drawn to paythe first and third items.

5 Repay any drawn amounts the liquidity facility provider and then to the liquidity account until the balance isequal to the liquidity reserve target amount.

6 The scheduled principal payment amount currently due on the class A notes, to the earliest issued series andthen to each subsequent series in chronological order of issuance and, within each series to each classsequentially in ascending numerical designation of each class but pro rata among any alphabeticalsub-classes of the same class.

7 Reimburse the servicer for optional modifications made, capped at 2.00% of the initial appraised value of theportfolio.

8 If a rapid amortization event (but no early amortization event) has occurred, pay the class A notes' unpaidprincipal balance sequentially to the earliest issued rapid amortizing series and then to each subsequentrapid amortizing series in chronological order of issuance and, within each rapid amortizing series to eachclass sequentially in ascending numerical designation of each class but pro rata among any alphabeticalsub-classes of the same class.

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



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Table 12

Payment Waterfall (cont.)

Priority Payment

10 Pro rata; first, 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 issued series,then to each subsequent series in chronological order of issuance and, within each series to each classsequentially in ascending numerical designation of each class but pro rata among any alphabeticalsubclasses of the same class.

12 If a rapid amortization event (but no early amortization event) has occurred, pay the class B notes' unpaidprincipal balance sequentially to the earliest issued rapid amortizing series and then to each subsequentrapid amortizing series in chronological order of issuance and, within each rapid amortizing series to eachclass sequentially in ascending numerical designation of each class but pro rata among any alphabeticalsubclasses of the same class.

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

14 Pro rata, all current and past due additional interest on the class A notes.

15 Pro rata, 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.

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.

Table 13

Payment Waterfall After An Event Of Default

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; first, all current and past due interest on the class A notes other than current or past dueadditional interest; second, interest owed to the liquidity facility provider; third, senior hedge payments;and fourth, indemnifications to the liquidity facility provider, provided that the liquidity facility may only bedrawn to pay the first and third items.

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

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

7 Pro rata, all current and past due interest on the class B notes other than current or past due additionalinterest

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

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



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Table 13

Payment Waterfall After An Event Of Default (cont.)

Priority Payment

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.


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 (table 14).

Table 14

Payment Waterfall After Railcar Disposition

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 based on the amount due, to senior hedge payments, and to pay the allocable note balances of theportfolio railcars sequentially to class A notes in order of issuance, and within each series by ascendingnumeric order among any numerical sub-classes of the class A notes in the same series, but pro rata amongany alphabetical sub-classes of the same class until paid in full, then to class B notes in order of issuance,and within each series by ascending numeric order among any numerical subclasses of the class A notes inthe same series, but pro rata among any alphabetical sub-classes of the same class until paid in full

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

5 Class A redemption premium.

6 Rapidly amortizing class A notes' outstanding principal balance (after paying item 3), first sequentiallyamong each rapid amortizing series in order of issuance, second within each rapid amortizing series to eachclass sequentially in numerical order, but pro rata among any alphabetical sub-classes 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), first sequentiallyamong each rapid amortizing series in order of issuance, second within each rapid amortizing series to eachclass sequentially in numerical order, but pro rata among any alphabetical sub-classes 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.




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Chart 8 shows the class A notes' scheduled target principal balances.

Chart 8

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 subordinated class of notes, onthe final maturity 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 either or both of the issuers;

- 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 has occurred;

- An issuer is required to register as an investment company under the Investment Company Act



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of 1940;

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

- The trustee removes a servicer or an administrator, and no successor servicer or administratorassumes 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

- An issuer fails in its performance of certain covenants, and such failure remains unremediedfor 30 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 events orconditions listed below 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 ofrailcars;

- 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 occurs if the class A notes have not been paid in full on or before theexpected principal repayment date (June 2028).

Legal Matters

In rating this transaction, S&P Global Ratings will review the legal matters that it believes arerelevant to 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. Thesesteps include:

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

- Making periodic telephone calls and holding meetings with the issuers' and servicers' key



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management 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.

We will continue to develop and provide performance information, research, and analysis toincrease the level of transparency, as well as information on our methodology, ratings, and ratedtransactions' performance.

Related Criteria

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

- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology AndAssumptions, March 8, 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

- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk InStructured Finance Transactions, Oct. 9, 2014

- Criteria | Structured Finance | General: Criteria Methodology Applied To Fees, Expenses, AndIndemnifications, July 12, 2012

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

- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

Related Research

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



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