DBRS Releases Methodology for Rating Canadian Equipment Finance Securitization

The DBRS methodology published today outlines the approach that DBRS employs when reviewing equipment finance securitizations, providing guidance to the key risk elements that must be dealt with, along with appropriate stress levels. Equipment loans and leases have been a significant part of the Canadian securitization market for both asset-backed commercial paper (ABCP) issuers and term asset-backed securities (ABS) issuers.

“While equipment securitization deals have similar credit characteristics as other amortizing pools such as auto loans and leases,” says Scott Bridges, Senior Vice President, “they also have a number of unique features that must be considered in the analysis of the transaction.”

The methodology details the different aspects of an equipment finance transaction that are analyzed by DBRS before assigning a rating, including the originator, types of financing, historic portfolio performance, credit enhancement and structural issues.