Np Spe Ix Lp

Presale: NP SPE IX L.P. (Series 2019-1)

August 21, 2019

PRIMARY CREDIT ANALYST

Preliminary Ratings Steven Margetis New York Class Preliminary rating Preliminary amount (mil. $) (1) 212-438-8091 A-1 A (sf) 73.902 steven.margetis @spglobal.com A-2 A (sf) 165.610 SECONDARY CONTACT B BBB (sf) 18.909 Rajesh Subramanian Note: This presale report is based on information as of Aug. 21, 2019. The rating shown is preliminary. This report does not constitute a Centennial recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of a final rating that differs from the (1) 303-721-4241 preliminary rating. rajesh.subramanian @spglobal.com

ANALYTICAL MANAGER Profile Kate R Scanlin Expected closing Aug. 29, 2019. New York date (1) 212-438-2002

Expected maturity Sept. 21, 2026. kate.scanlin @spglobal.com date CORPORATE & GOVERNMENT CREDIT Legal final maturity Sept. 20, 2049. ANALYST date Betsy R Snyder, CFA Optional Subject to certain restrictions, the class A notes can be redeemed in whole or in part one year after redemption closing at a price equal to their outstanding principal balance, together with accrued and unpaid New York interest thereon and any applicable redemption premium. (1) 212-438-7811 betsy.snyder Collateral A $315,147,746 (the adjusted value as of June 30, 2019) portfolio comprising 3,489 railcars. This @spglobal.com combined fleet backs the series 2019-1 notes. The issuer has the right to lease revenues from the portfolio and any residual cash flows from the sale of the railcars. RESEARCH ASSISTANTS

Issuer NP SPE IX L.P. Matthew Gardener New York Servicer Trinity Industries Leasing Co. Mariana Gurevich Indenture trustee Wilmington Trust Co. New York

Liquidity provider Landesbank Hessen-Thüringen Girozentrale ("Helaba Bank").

Rationale

The preliminary 'A (sf)' and 'BBB (sf)' ratings assigned to NP SPE IX L.P.'s $258.421 million fixed-rate secured railcar equipment notes series 2019-1 reflects:

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© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer 2286380 on the last page. Presale: NP SPE IX L.P. (Series 2019-1)

- The likelihood that timely interest and ultimate principal payments will be made on or before the legal final maturity date for the class A-1 and A-2 notes; and ultimate interest and principal payments will be made on or before the legal final maturity date for the class B notes;

- 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. (TILC); and

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

Transaction Overview

Strengths

In our view, this transaction's strengths include:

- 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--a majority of the railcars are less than six years old;

- 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 (90.43%), which exposes the transaction to the railcars' uncertain variable expenses, such as maintenance.

- There are some CPC-1232 railcars (expected to be 7.42% of the pool as of the closing date) that are subject to new regulations and therefore can incur certain costs in order to be compliant, though the issuer estimates these costs will be minimal.

- We have not rated 45.20% (based on the number of railcars) of the lessees and have rated 7.39% 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.

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.

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- 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 50% lessee defaults during the lease term for a five-year operating lease that is subject to six months of downtime in between lessees.

- We apply stress scenarios to the cashflow modeling for fleet utilization, lease rates, and operating expenses through four four-year sector downturns of four-years.

- Although there are some CPC-1232 tank cars in the pool, they only account for 7.42% of the portfolio by car count and the related costs are expected to be minimal per the issuer. In addition, all of the current lease agreements include provisions that allow an increase in monthly lease payments effective when a mandated modification is completed, though we did not give credit to these provisions in our cash flow projection.

Industry Characteristics And Sector Outlook

Key characteristics of the railcar leasing industry include:

It's somewhat concentrated, with only a few major participants and several smaller ones.

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

Railroad companies and shippers typically choose not to invest in tank cars, so lessors own about 75% of tank cars in the U.S. In 2016, railcar carloads declined 8.2%, primarily due to less demand for commodities such as coal and petroleum products, while in 2017 they increased 4.8%, primarily due to an increase in chemicals and intermodal traffic. In 2018, North American carloads rose by 2.0%, driven by an increase in petroleum and petroleum products. Volume has been flat to declining in 2019; through March 2, North American carloads decreased by 0.2% year-over-year, with strong performance again reported in petroleum and petroleum products. A large percentage of lessees are rated investment-grade ('BBB-' or higher) with low-credit losses.

Railcar manufacturers include Trinity Industries Inc. (Trinity), American Railcar Industries Inc., Greenbrier, Union Tank Car Co., Freightcar America, and National Steel Car. Railcar lessors include Greenbrier, Union Tank Car Co., Chicago Freight Car Leasing, CIT Railcar Funding Co., GATX Corp., TTX Co., TILC, The Andersons, Wells Fargo Rail, SMBC Rail Services LLC (formerly known as Flagship Rail Services and which acquired American Railcar Leasing LLC in June 2017), and CAI Rail.

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

S&P Global Ratings expects U.S. GDP growth of 2.3% in 2019--which should contribute to demand for certain car types, especially those that transport chemicals and housing-related products--as well as continued strong demand for intermodal traffic. We expect oil prices to decline 5%-10% in 2019, to $50-$55 a barrel, which could ease pressure on demand and lease rates for cars that transport crude.

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 secure longer-than-typical lease terms (10 years, rather than the normal four to seven) and higher rates.

Even with weaker demand, the contracts' terms make it difficult to return cars early, which should keep utilization, revenues, and cash flows fairly stable over the next several years. However, lease

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rates for other cars that have been re-leased have been at substantially lower rates with shorter lease terms. Lessors can also reduce capital spending to add to their fleets--and thus maintain utilization levels--and write shorter lease terms at lower lease rates with the expectation they will be able to increase them when stronger demand returns, which has been the case recently.

In addition, consolidation has occurred in this sector. On Sept. 30, 2015, General Electric Railcar Services LLC sold its tank car fleet to Union Tank Car Co., already the largest tank car lessor, with the balance of the sale (completed in first-quarter 2016) to Wells Fargo Rail, owned by the bank Wells Fargo & Co., another large railcar lessor. On June 1, 2017, SMBC Rail Services LLC completed its acquisition of American Railcar Leasing LLC. On Dec. 5, 2018, ITE Management LP completed its acquisition of American Railcar Industries Inc.

The industry isn't exempt from regulation though. After a spate of accidents involving tank cars transporting crude oil, the U.S. Department of Transportation (DOT) unveiled new tank car regulations in May 2015 and implemented them two months later. However, many of the regulations regarding retrofitting or replacing older tank cars will take many years to phase in. In the meantime, with weaker demand, many of the older cars have been scrapped, which we expect to continue, and some of the costs of the newer cars to be retrofitted will be passed on to the lessees through lease rates. In the case of the Issuer's fleet, none of the tankcars are expected to be subject to retrofit requirements.

Transaction Structure

NP SPE IX L.P. (the issuer) is a bankruptcy-remote limited partnership formed under the laws of Delaware. The issuer is a wholly owned special subsidiary of NP SPE IX Holdings L.P. (NP SPE IX Holdings). The issuer's business is limited to owning railcars, leases, and related assets, as well as activities related to the same.

The issuer will purchase through a true sale a portfolio of railcars consisting of tank cars and non-tank freight cars of different types and their related leases. The issuer will then grant a security interest in the leased railcars and leases, along with the rights under the related agreements and accounts, to the indenture trustee for the bondholders' benefit. According to the data we have been provided, the issuer will acquire 3,489 railcars, worth approximately $315,147,746 in appraised value.

The trustee will pay principal and interest due on the notes from the payments that the underlying lessees 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 1 for the transaction structure).

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Chart 1

Administrator/Servicer

NP Railcar Investments III Holdings L.P. is a limited partnership formed under Delaware law that is owned by the NP Railcar parent funds. The administrator provides certain accounting, entity governance, and other related support services to the issuer. Napier Park Global Capital (US) L.P. (NPGC), NP Railcar's manager, performs these services on its behalf. NPGC has prior experience overseeing investments, including railcar investments. The issuer relies on NPGC's and TILC's expertise to provide certain services for the portfolio railcars.

If the administrator fails to perform their obligations under the administration agreement, noteholders could experience delays and reduced payments. The administrator cannot replace the servicer unless certain events occur, including Trinity's failure to pay certain debts when due, a utilization differential for the servicer's fleet exceeds specified limits, and a monthly lease

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differential for the servicer's fleet exceeds specified limits.

TILC, a wholly owned subsidiary of Trinity, was incorporated under Texas law in 1979. Through its subsidiaries, Trinity is a leading North American designer and manufacturer of tank and non-tank freight railcars. TILC leases tank cars and non-tank freight cars to industrial companies in petroleum, chemical, agricultural, energy, and other industries. TILC's owned and managed fleet is one of the largest among the top railcar operating lessors. As of June 30, 2019, TILC's managed fleet consisted of approximately 77,510 railcars that TILC wholly owns or are managed for Trinity's wholly owned special-purpose subsidiaries. The utilization rate for the TILC-managed fleet was 98.5% as of June 30, 2019.

NP SPE IX L.P.'S servicing agreement contains provisions requiring TILC to operate, maintain, lease, and re-lease the railcars it manages regardless of whether the railcars are part of the securitized fleet, its own fleet, or other fleets that it manages.

Lease revenues include all ancillary services that are provided along with the railcar rentals. Shippers typically lease approximately 75% of the tank car fleet, a percentage that has held relatively constant for the past several years. Tank cars are used to transport renewable fuels, agricultural, chemical, semigaseous, or gaseous products, and other types of industrial liquids, including petroleum-based products. Non-tank freight cars include open-top hoppers, which transport products such as coal and mineral aggregates; covered hoppers, which transport products such as grain, cement, plastic products, and other granular products; autoracks, which transport passenger cars and light-duty trucks; boxcars, which transport paper, auto parts, and refrigerated consumable products; mill gondolas, which transport rolled steel and other milled metal products; and intermodal cars, which transport standardized intermodal containers.

Portfolio Characteristics

The issuer's portfolio includes approximately 3,489 railcars. The portfolio includes 90.43% full-service leases, 9.23% net leases, and 0.34% off-leases (by number of rail cars). See table 1 below for a portfolio breakdown by railcar type. All information regarding the issuer's fleet is as of December 2018.

Table 1

Portfolio Breakdown by Railcar Type

Car type No. of railcars % of total

Tank 1,669 47.8

Freight 1,820 52.2

Total 3,489 100.0

The portfolio is relatively young; the weighted average age by car count is 5.92 years. The 3,489 railcars are a diversified mix of freight and tank cars with leases expiring in the next seven to 145 months as of June 2019. In most cases, our assumed lease rate factor for the cars is less than the 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 useful lives (see the Cash Flow Assumptions section). A railcar's useful life is typically 30-50 years, which is longer than the transaction's 30-year life.

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Table 2

Portfolio Stratification By Year Of Manufacture

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

1998 10 0.29

2000 65 1.86

2001 58 1.66

2002 101 2.89

2003 14 0.40

2004 124 3.55

2005 98 2.81

2006 144 4.13

2007 201 5.76

2008 213 6.10

2013 6 0.17

2014 304 8.71

2015 382 10.95

2016 418 11.98

2017 821 23.53

2018 369 10.58

2019 161 4.61

Total 3,489 100.00

(i)Amounts may not total due to rounding.

The demand for specialty railcars is typically based on overall economic growth--the growth of certain industry segments, such as manufacturing and shipping, and the replacement of older equipment. Of all the railcar types, tank car leasing has historically been the most stable and predictable cashflow 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 more than 90% throughout economic cycles. The commodities these cars transport tend to be less affected by economic cycles than other commodities. To counter the lower demand for specialty railcars in economic downturns, lessors tend to shorten lease terms with lower lease rates to maintain strong utilization levels. This allows lessors to extend lease terms at higher rates when demand recovers.

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

Table 3

Portfolio Stratification By Industry Served

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

Agriculture 898 25.74

Chemical 845 24.22

Mining and Mineral 437 12.53

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Table 3

Portfolio Stratification By Industry Served (cont.)

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

Refined Petroleum 377 10.81

Industrial Gas 251 7.19

Paper and Packaging 147 4.21

Petroleum 143 4.10

Petrochemical 110 3.15

Coal 104 2.98

Renewable Fuels 100 2.87

Plastics 77 2.21

Total 3,489 100.00

(i)Amounts may not total due to rounding.

As of June 30, 2019, there were 66 lessees in the pool. On the closing date, we expect the largest lessee will account for approximately 4.96% (by units) of the total railcars leased. Railcars leased to the 10 largest lessees account for approximately 40.73% (by units) of the total railcars leased. A lessee default could increase the portion of railcars that may need to be remarketed because of repossession. Based on the current portfolio composition by lessee (as measured by the number of railcars), 47.06% are rated investment-grade, 7.39% are rated speculative-grade, and 45.20% are not rated.

Generally, once a lessee defaults, the servicer 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 would not receive cash flow during the downtime. The stress level we apply to the utilization rate can incorporate 42% lessee defaults during the lease term as shown in the Cash Flow Results section 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' Ratings

Rating No. of railcars % of total(i)

AA- 313 8.97

A+ 199 5.70

A 208 5.96

A- 310 8.89

BBB+ 127 3.64

BBB 296 8.48

BBB- 189 5.42

BB+ 29 0.83

BB 65 1.86

B- 9 0.26

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Table 4

Portfolio Lessee Stratification By S&P Global Ratings' Ratings (cont.)

Rating No. of railcars % of total(i)

BB- 155 4.44

Not rated 1577 45.20

Off lease 12 0.34

Total 3,489 100.00

(i)Amounts may not total because of rounding.

The servicer 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 will establish renewal lease rates for those railcars on which the related lease is renewed. Renewal lease rates are typically based on the initial lease rate, the railcar industry's strength, customer demand, and the applicable railcar's age and expected useful life. Tables 5-7 detail the portfolio stratifications 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)

<=499 805 23.07

500-599 1,124 32.22

600-699 523 14.99

700-799 227 6.51

800-899 53 1.52

>=900 757 21.70

Total 3,489 100.00

(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)

Off-Lease 12 0.34

1-11 15 0.43

12-22 803 23.02

23-33 296 8.48

34-44 632 18.11

45-55 477 13.67

56-66 457 13.10

67-77 160 4.59

78-88 111 3.18

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Table 6

Portfolio Stratification By Remaining Lease Term

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

89-99 109 3.12

100-110 173 4.96

111-121 194 5.56

133-143 25 0.72

144-154 25 0.72

Total 3,489 100.00

(i)Amounts may not total due to rounding.

Table 7

Comparison With Recent Transactions

Trinity Rail Trinity Rail NP SPE IX Leasing 2019 Leasing 2018 USQ Rail I LLC Element Rail Leasing 2019-1 LLC LLC (Series 2018-1) II LLC (Series 2016-1)

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

Average age (years) 5.92 7.42 5.09 7.11 3.70

Average remaining lease 4.25 5.29 5.70 5.23 4.70 term (years)

Average monthly lease rate 691 628 654 859 931 ($)

% of tank cars 47.84 42.85 38.00 46.49 51.30

Largest lessee (%)(i) 5.00 5.20 8.50 7.80 8.60

% investment-grade 47.06 58.50 50.49 37.70 41.50 lessees

Largest industry (%) 25.74 11.12 16.90 19.08 28.30

(i)By number of railcars.

Cash Flow Assumptions

The transaction's cash flows depend on a number of key inputs, some of which are contractual (for example, lease rates) and some of which we modeled based on historical performance, our economic scenarios, and our expectation of the railcars' lifespan. We have incorporated the stresses for each of those components into four sector downturns (each of which is four years long) 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 cashflow 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;

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- 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 cashflow model includes input assumptions for the following economic conditions:

- Years 1-4: recession;

- Years 5-9: normal economic conditions;

- Years 10-13: recession;

- Years 14-18: normal economic conditions;

- Years 19-22: recession;

- 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 each payment date and full principal by the final maturity date. We have stressed and changed four of these aforementioned inputs during the transaction's life. We adjusted our assumptions for the value of these inputs to stress the transaction at a level that we believe is commensurate with our assigned preliminary ratings.

Utilization Rates

Based on our 'A' assumptions, fleet utilization levels during any of the downturns step down to 75%-80% and then recover. During a four-year downturn, we assumed that the utilization at the beginning (year one) and end (year four) of the downturn was halfway between the bottom and base levels. During the recent sector downturn, U.S. fleet utilization briefly dipped below 70%. In our view, stressing the utilization rate at similar levels for two years is commensurate with an 'A' rating stress level. Likewise, in our 'BBB' assumptions, fleet utilizations levels decrease to 80%-85% and then recover within the same timeframes.

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-year operating lease that is subject to six months of downtime in between lessees, 76% utilization can typically incorporate 42% lessee defaults during the lease term (see chart 2).

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Chart 2

Lease Rates

We model future lease rates based on a "lease rate factor curve," which converts a railcar's value to the corresponding lease rentals using a factor that changes (one that typically increases) over time. To determine this calculation, we begin with the appraised value provided by a third-party appraiser, 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 the base-case lease rates by 30%-35% and 20%-25% for the 'A' and 'BBB' rating levels, respectively. Similar to how we model fleet utilization, we "step down" to halfway between the base and low during years one and four of each downturn (see chart 3).

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Chart 3

Useful Life And Residual Proceeds

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

Although most of the cash flow comes from lease rentals, we do assume a modest residual value of 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 fleet on full-service leases. During a downturn, companies often return cars more frequently, which leads to increased maintenance expenses. Lower U.S. fleet utilization has reduced congestion and increased the leased cars' speed and mileage. In addition, railroad operators have increasingly deployed wheel sensors to detect possible damages and have been removing cars from the operating fleet for wheel replacement more proactively than in the past. This has also increased maintenance expenses, which we have incorporated into our cashflow model.

For our base-case modeling, we adjusted the railcars' maintenance costs so that they were in line with the utilization rate, assuming that unleased railcars require minimal maintenance. We generally inflate expenses by 2.0%-2.5% per year. During a downturn, we stress operating expenses by 25%-30% for the 'A' rating stress level. Similarly to how we model utilization and lease rates, this stress "steps up" halfway to the peak of 25% during the first and last year of each downturn 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 fleet utilization and re-leasing rates decrease and operating expenses increase. The magnitude of the stresses is rating-dependent.

To decrease the volatility in forecasting lease rates, which results from fluctuations in the fair market value of railcars, in our rating analysis, we use as the initial railcar value--in addition to the fair market value of railcars (see table 10)--the depreciated original equipment cost (OEC) estimated by RailSolutions (see table 11). Under the depreciated OEC approach, we developed a lease rate factor curve (as a percentage of the depreciated OEC) based on lease rate data going back as far as 1980.

Table 8

Cash Flow Results--Fair Market Approach(i)

Noteholders are paid in full with what maximum Description Stress modeled haircut/cost increase?

'A' stress case Cut utilization to 76% and reduce the base-case lease rates by 30%-75% while Timely interest and increasing the operating expense by 25% during four sector downturns; ultimate principal are depreciate starting values by 6%-7% for residual values, with additional stress paid to the class A during a recession; fair market value for the initial railcar value; lease rate noteholders. factor curve based on fair market value.

'BBB' stress Cut utilization to 83% and reduce the base-case lease rates by 20%-60% while Ultimate interest and case increasing the operating expense by 17% during each of four sector downturns; principal are paid to residual value computed by depreciating the starting value at 6%-7%, with class B noteholders. additional stress for sales during a recession; fair market value for the initial railcar value; lease rate factor curve based on fair market value; additional stress for tank cars subject to retrofit under DOT guidelines.

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

Table 9

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

Noteholders are paid in full with what maximum Description Stress modeled haircut/cost increase?

'A' stress case Cut utilization to 76% and reduce the base-case lease rates by 30%-75% Timely interest and while increasing the operating expense by 25% during four sector downturns; ultimate principal are depreciate starting values by 6%-7% for residual values, with additional paid to the class A stress during a recession; depreciate OEC for the initial railcar value; lease noteholders. rate factor curve based on OEC.

'BBB' stress Cut utilization to 83% and reduce the base-case lease rates by 20%-60% Ultimate interest and case while increasing the operating expense by 17% during each of four sector principal are paid to downturns; residual value computed by depreciating the starting value at class B noteholders. 6%-7%, with additional stress for sales during a recession; depreciated OEC for the initial railcar value; lease rate factor curve based on OEC; additional stress for tank cars subject to retrofit under DOT guidelines.

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

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Sensitivity Analysis

Break-even scenarios and sensitivity analyses

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

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

Table 10

Sensitivity Scenarios--Fair Market Value Approach (i)

Noteholders are paid in full with what Description Stress modeled maximum haircut/cost increase?

Utilization break-even Same as the 'A' stress case listed in table 9 but 11% additional stress for the class A notes. ('A') increasing the utilization stress until the notes would not get paid in full.

Re-leasing rate Same as the 'A' stress case listed in table 9 but 37% additional stress for the class A-1 break-even ('A') increasing the lease rate stress until the notes notes and 24% additional stress for the would not get paid in full. class A-2 notes.

Utilization breakeven Same as the 'BBB' stress case listed in table 8, 16% additional stress for the class B notes. test ('BBB') increasing the utilization stress until the notes would not get paid in full.

Re-leasing rate Same as the 'BBB' stress case listed in table 8, 24% additional stress for the class B notes. breakeven test ('BBB') increasing the lease rate stress until the notes would not get 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)

Noteholders are paid in full with what Description Stress modeled maximum haircut/cost increase?

Utilization break-even Same as the 'A' stress case listed in table 10 but 11% additional stress for the class B notes. ('A') increasing the utilization stress until the notes would not get paid in full

Re-leasing rate Same as the 'A' stress case listed in table 10 but 41% additional stress for the class A-1 break-even ('A') increasing the lease rate stress until the notes notes and 31% additional stress for the would not get paid in full class A-2 notes.

Utilization break-even Same as the 'BBB' stress case listed in table 9, 16% additional stress for the class B notes. test ('BBB') increasing the utilization stress until the notes would not get paid in full.

Re-leasing rate Same as the 'BBB' stress case listed in table 9, 31% additional stress for the class B notes. breakeven test ('BBB') increasing the lease rate stress until the notes would not get paid in full.

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

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Payment Priority

Classes A-1, A-2, and B are fixed-rate notes. On each monthly payment date, so long as no event of default has occurred and is continuing, according to the transaction's documents, the funds will be distributed in the payment priority shown in table 11.

Table 11

Payment Waterfall

Priority Payment

1 Pro rata, the required expense amount and service provider fees and taxes.

2 To the servicer, to reimburse servicer advances.

3 Pro rata: to the applicable series accounts for the class A notes on a pro rata basis, all current and past due interest on the outstanding class A notes of each series, other than current or past due additional interest; to each hedge provider, all senior hedge payments due for hedge agreements, provided that any amounts drawn from the liquidity reserve account or any liquidity facility will not be applied to pay any hedge termination value or hedge partial termination value; and to the liquidity facility providers, to pay pro rata all interest owed to the providers in connection with draws under the related liquidity facilities.

4 Pro rata, to deposit in the liquidity reserve account an amount equal to the positive difference (if any) between the liquidity reserve target amount and the sum of the balance in the liquidity reserve account and the aggregate liquidity facility available amounts; to the liquidity facility providers, to reimburse or repay, pro rata, the liquidity facility providers in an amount equal to all other amounts due to them, and not paid in item 3.

5 The scheduled principal payment amounts on all series of outstanding class A notes, first, to the outstanding class A notes of the earliest issued series and then to subsequent series in chronological order of issuance, and, second, within each series, to each class sequentially in ascending numerical designation of each class but, pro rata, among any alphabetical subclasses of the same numerical class.

6 To pay or reimburse the servicer for costs of servicer optional modification expenses, up to an aggregate amount with respect to all servicer optional modification expenses not to exceed the servicer optional modification cap.

7 As long as no early amortization event has occurred and is continuing, to the applicable series accounts for the class A notes to pay outstanding principal balance of all rapid amortization notes that are class A notes, first, sequentially among each rapid amortization series in chronological order of issuance, and, second, within each rapid amortization series, to each rapid amortization class sequentially in ascending numerical designation of each such class but, pro rata, among any alphabetical subclasses of the same numerical class.

8 If an early amortization event has occurred and is continuing, to the applicable series accounts for the class A notes an amount equal to the outstanding principal balance of the class a notes (after the payments in item 5 above), pro rata, according to the outstanding principal balance of all class A notes.

9 Pro rata, based on the amount due, to the applicable series accounts for the class B notes, all current and past due interest on the outstanding class B notes of each series, other than current or past due additional interest.

10 As long as no early amortization event has occurred and is continuing, to the applicable series accounts for the class B notes the scheduled principal payment amounts on all series of outstanding class B notes, first, to the earliest issued series and then to subsequent series in chronological order of issuance, and second, within each series, to each class sequentially in ascending numerical designation of each such class but, pro rata, among any alphabetical subclasses of the same numerical class.

11 To the applicable series accounts for the class B notes to pay of the outstanding principal balance of all rapid amortization notes that are class B-1 notes, first, sequentially among each rapid amortization series in chronological order of issuance and, second, within each rapid amortization series, to each rapid amortization class sequentially in ascending numerical designation of each such class but pro rata among any alphabetical subclasses of the same numerical class.

12 If an early amortization event has occurred and is continuing, to the applicable series accounts for the class B notes an amount equal to the outstanding principal balance of the class B notes (after the payments in item 10), pro rata, according to the outstanding principal balance of all class B notes.

13 To the applicable series accounts for the class A notes, all current and past due additional interest due on the class A notes, pro rata, based on the amount due.

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Table 11

Payment Waterfall (cont.)

Priority Payment

14 To the applicable series accounts for the class B notes, all current and past due additional interest due on the class B notes, pro rata, based on the amount due.

15 To the applicable series accounts for the class A notes, any redemption premium owing to the holders of the class A notes, pro rata, based on the amount due.

16 To the applicable series accounts for the class B notes, any redemption premium owing to the holders of the class B notes, pro rata, based on the amount due.

17 To the hedge providers for subordinated hedge payments, pro rata, based on the amount due.

18 Any issuer indemnities payable to the initial purchaser of the initial notes and the additional series.

23 Pari passu and pro rata to pay or reimburse the issuer (or the servicer on its behalf) for costs of optional modifications to the extent not paid to item seven or any other available source of revenues of the issuer.

24 To pay all of the issuer's other monetary obligations under the operative agreements.

25 Remaining proceeds to the certificate account for distribution to the class E certificateholders.

Payment priority after an event of default

If an event of default occurs, collections will be distributed according to the payment priority outlined in table 12.

Table 12

Payment Waterfall After An Event Of Default

Priority Payment

1 Pro rata, the required expense amount and service provider fees and taxes.

2 To the servicer, to reimburse servicer advances.

3 Pro rata, to the class A notes, all current and past due interest, other than current or past due additional interest, and to each hedge provider, all senior hedge payments due for hedge agreements, provided that any amounts drawn from the liquidity reserve account or any liquidity facility will not be applied to pay any hedge termination value or hedge partial termination value.

4 Pro rata, based on the outstanding principal balances of the outstanding class A notes of each series, to the applicable series accounts for the class A notes, the outstanding principal balances of the class A notes until paid in full.

5 To pay or reimburse the servicer for servicer optional modification expenses, up to an aggregate amount with respect to all such payments not to exceed the servicer optional modification cap.

6 Pro rata, based on the amount due, to the applicable series accounts, all current and past due interest on the outstanding class B notes of each series, other than current or past due additional interest, until paid in full.

7 Pro rata, based on the outstanding principal balances of the outstanding class B notes of each series, to the applicable series accounts, the outstanding principal balances of the class B notes until paid in full.

8 To the applicable series accounts for the class A notes, all current and past due additional interest due on the class A notes, pro rata, based on the amount due.

9 To the applicable series accounts for the class B notes, all current and past due additional interest due on the class B notes, pro rata, based on the amount due.

10 To the applicable series accounts for the class A notes, any redemption premium owing to the holders of the class A notes, pro rata, based on the amount due.

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Table 12

Payment Waterfall After An Event Of Default (cont.)

Priority Payment

11 To the applicable series accounts for the class B notes, any redemption premium owing to the holders of the class B notes, pro rata, based on the amount due.

12 To the hedge providers for subordinated hedge payments, pro rata, based on the amount due.

13 Any issuer indemnities payable to the initial purchaser of the initial notes and the additional series.

14 Pari passu and pro rata to pay or reimburse the issuer (or the servicer on its behalf) for costs of optional modifications to the extent not paid to item five above or from any other available source of revenues of the issuer

15 To pay all of the issuer's other monetary obligations under the operative agreements.

16 Remaining proceeds to the certificate account for distribution to the class E certificateholders.

On each payment date, as long as no event of default has occurred and is continuing, if the net disposition proceeds have been transferred to the collection account, the balance should be applied in the following order of priority (table 13).

Table 13

Payment Waterfall Of Railcar Disposition Distribution

Priority Payment

1 Pro rata, the required expense amount and service provider fees and taxes.

2 Pro rata, to deposit in the liquidity reserve account an amount equal to the positive difference (if any) between the liquidity reserve target amount and the sum of the balance in the liquidity reserve account and the aggregate liquidity facility available amounts; to the liquidity facility providers, to reimburse or repay, pro rata, the liquidity facility providers in an amount equal to all other amounts due to them.

3 Pro rata based on the amount due to the applicable series accounts for the class A notes and class B notes, an amount equal to the allocable note balances for the related disposed railcars, applied sequentially, first, to the class A notes of the earliest issued series and then to subsequent series of class A notes in chronological order of issuance, and within each series by ascending numeric order among any numerical sub-classes of the class A notes in the same series but pro rata among any alphabetical subclasses of the same numerical class until paid in full, and, second, in the same order for the class B notes until paid in full, and then to each hedge provider, senior hedge payments.

4 To pay or reimburse the servicer for servicer optional modification expenses, up to an aggregate amount with respect to all such payments not to exceed the servicer optional modification cap.

5 To the applicable series accounts for the class A notes, if any redemption premium for the railcar disposition owed to the class A noteholders, pro rata based on the amount due.

6 To the applicable series accounts for the class A notes, the outstanding principal balance of all rapid amortization notes that are class A notes (after the payments in item 3 above), first, sequentially among each rapid amortization series in chronological order of issuance, and, second, within each rapid amortization series, to each rapid amortization class sequentially in ascending numerical designation of each such class but pro rata among any alphabetical subclasses of the same numerical class, provided, however, that if an early amortization event exists, no payments will be made on any rapid amortization series pursuant to this item.

7 If an early amortization event has occurred and is then continuing, to the applicable series accounts for the class A notes, an amount equal to the outstanding principal balance of the class A notes (after the payments in items 3 and 6), pro rata, according to the outstanding principal balance of all class A notes.

8 To the applicable series accounts for the class B notes, any redemption premium for the railcar disposition owed to the class B noteholders, pro rata based on the amount due.

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Table 13

Payment Waterfall Of Railcar Disposition Distribution (cont.)

Priority Payment

9 To the applicable series accounts for the class B notes, the outstanding principal balance of all rapid amortization notes that are class B notes (after the payments in item 3, first, sequentially among each rapid amortization series in chronological order of issuance, and second, within each rapid amortization series, to each rapid amortization class sequentially in ascending numerical designation of each such class but pro rata among any alphabetical subclasses of the same numerical class, provided, however, that if an early amortization event exists, no payments will be made on any rapid amortization series according to this item.

10 If an early amortization event has occurred and is then continuing, to the applicable series accounts for the class B notes, an amount equal to the outstanding principal balance of the class B notes (after the payments in items 3 and 9 above), pro rata according to the outstanding principal balance of all class B notes.

11 To the hedge providers, the amount of any subordinated hedge payments, pro rata based on the amount due.

12 Any issuer indemnities payable to the initial purchaser of the initial notes and the additional series.

13 Pari passu and pro rata to pay or reimburse the issuer (or the servicer on its behalf) for costs of optional modifications to the extent not paid to item four above or from any other available source of revenues of the issuer.

14 Remaining proceeds to the certificate account for distribution to the class E certificateholders.

Chart 4 shows the classes' 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 on the class A notes (other than additional interest) for five business days;

- A failure to pay principal or accrued and unpaid interest on any series or class on the final maturity date;

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

- A failure by the issuer or administrators to comply with any covenants under the operating documents that has a material adverse effect on the noteholders and continues for 30 days (or 60 days if the issuer have begun to remedy the failure) or more after written notice has been given to the issuer;

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

- The issuer's voluntary or involuntary bankruptcy;

- A judgment of more than $1 million that is not covered by insurance is rendered against the issuer and either enforcement proceedings have begun or a 10-consecutive-day period, 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 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 administrator assumes the duties within 180 days in the case of servicer and 60 days in the case of the administrator;

- The notes' outstanding principal balance exceeds the railcars' adjusted value and the optional reinvestment account;

- An issuer uses or permits the use of the railcars in a way not permitted by the indenture;

- A servicer materially defaults on its obligations under the account administration agreement and the issuer has failed to exercise its right for 30 days after being informed; or

- An issuer fails to perform certain material covenants, and such failure remains unremedied for 30 days.

If an event of default has occurred and is continuing, the trustee can take any and all remedial actions at the written request of a majority of senior noteholders by principal balance. While this exposes the class B notes to additional risk if an event of default occurs while any class A-1 or A-2 notes are still outstanding, our analysis indicates that this is not likely to occur under our 'BBB' stress scenarios.

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Early And Rapid Amortization Events

Under the transaction documents, an early amortization event will occur if any of the events or conditions listed 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 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 utilization differential for the servicer's fleet, the monthly lease differential for the servicer's fleet, or rent abatement expenses for the servicer's fleet exceeding certain specified thresholds.

A rapid amortization event occurs if the class A-1, A-2, or B notes have not been paid in full on or before the expected principal repayment date.

Legal Matters

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

Surveillance

We use surveillance data to perform periodic reviews on all rated railcar securitizations to identify potential and emerging trends. Our ratings reflect our opinion of the transaction's ongoing risk profile. Our surveillance group undertakes a number of steps to determine whether the ratings assigned 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' key 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 rated transaction'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 And Special-Purpose Entity Criteria, May 15, 2019

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

- Criteria - Structured Finance - ABS: North America Railcar Lease-Backed ABS Methodology

www.standardandpoors.com August 21, 2019 21

And Assumptions, June 2, 2016

- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012

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

Related Research

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

In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Counterparty Risk Framework: Methodology And Assumptions," March 8, 2019; "Post-Default Ratings 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 And Outlooks," Sept. 14, 2009.

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