Structured Products and Related Credit Derivatives: A Comprehensive Guide for Investors

CHAPTER 20

Intermodal Equipment Securitization

Chris van Heerden, CFA

Analyst

Wachovia Capital Markets, LLC

Securitization has been used by lessors to raise secured financing against pools of marine shipping containers (i.e., intermodal equipment). In short, the asset class is marked by (1) sound long-term fundamentals of increasing global trade; (2) deals structured with a dependency on the servicer reflected in leverage restrictions; and (3) callable, wrapped securities that have performed consistently over the history of the asset class. This chapter provides an overview of the container shipping business and a brief review of the securitization of the asset class.

MARKET BACKGROUND

Container use has grown rapidly because it is internationally standardized, deployable in intermodal transport, and relatively inexpensive. As a result, the container has played a major role in the international division of labor that has allowed manufacturing to be located wherever it is most economical. Before the use of containers, the process of handling, gathering, and distributing cargo had changed little since the time of the Phoenicians.

Oceangoing cargo ships started using containers in the 1950s. In the late 1960s, an international agreement was reached that standardized the sizes of containers to be used for sea and land transportation. Containerization was a major improvement to the break-bulk shipments that were prevalent before the advent of containers. Break-bulk shipments involved ...