DBRS Publishes Final Rating Methodology for U.S. Equipment Lease and Loan Securitizations

DBRS has published its final rating methodology for U.S. equipment lease and loan asset-backed transactions (ABS). The final methodology does not have any substantive changes from the proposed equipment lease and loan methodology which was published on October 19, 2009 with a request for comments.

The methodology provides an overview of the key factors which DBRS believes could impact the performance of U.S. equipment ABS and our approach for rating these transactions. These factors include:

•Legal and Structural Matters; Documentation;
•Originations, Underwriting and Portfolio Management;
•Evaluating Collateral and Credit Support;
•Estimating Expected Pool Losses and Variability.

As part of the rating process, DBRS assesses the likelihood of repayment of interest and principal according to the terms of the proposed financial structure as set forth in the legal documents. We evaluate the adequacy of proposed credit enhancement levels and capital structure by estimating the lessee’s expected losses and the variability of the losses.

The key variables impacting this analysis may differ somewhat in application based on equipment type and issuer. Structured facilities for equipment transactions have been supported by collateral ranging from “micro” commercial equipment, to small, mid, and large-ticket commercial equipment. Furthermore, attributes of the issuers within the equipment leasing securitization market very in size, with both smaller independent “specialty finance” companies and large leasing “captive” companies being active participants.

DBRS criteria and methodologies are publicly available on its website www.dbrs.com under Methodologies.