DBRS Morningstar Finalizes Provisional Ratings on Pawnee Equipment Receivables (Series 2019-1) LLC Asset Backed Notes

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of asset-backed notes issued by Pawnee Equipment Receivables (Series 2019-1) LLC (the Issuer):

-- $67,000,000 Series 2019-1, Class A-1 Notes at R-1 (high) (sf)
-- $144,430,000 Series 2019-1, Class A-2 Notes at AAA (sf)
-- $11,510,000 Series 2019-1, Class B Notes at AA (sf)
-- $10,150,000 Series 2019-1, Class C Notes at A (sf)
-- $12,180,000 Series 2019-1, Class D Notes at BBB (sf)
-- $8,934,000 Series 2019-1, Class E Notes at BB (sf)

The ratings are based on a review by DBRS Morningstar of the following analytical considerations:

-- Transaction capital structure, proposed ratings and sufficiency of available credit enhancement, which includes overcollateralization, subordination and amounts held in the reserve account to support the DBRS Morningstar-projected cumulative net loss (CNL) assumption under various stressed cash flow scenarios.
-- The proposed concentration limits mitigating the risk of material migration in the collateral pool’s composition during the three-month prefunding period.
-- The capabilities of Pawnee Leasing Corporation (Pawnee) with regard to originations, underwriting and servicing. DBRS Morningstar has performed an operational review of Pawnee and considers the entity to be an acceptable originator and servicer of equipment-backed lease and loan contracts. In addition, Portfolio Financial Servicing Company, an experienced servicer of equipment lease-backed securitizations, will be the Backup Servicer for the transaction.
-- The expected Asset Pool does not contain any significant concentrations of obligors, brokers or geographies and consists of a diversified mix of the equipment types similar to those included in other small-ticket lease and loan securitizations rated by DBRS Morningstar.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with Pawnee and that the Indenture Trustee has a valid first-priority security interest in the assets. The transaction terms are also reviewed for consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”
-- The Company focuses on small-ticket financing ($250,000 cap for prime credits and lower for near-prime and non-prime credits). No non-prime credits will be included in the collateral for the Notes; however, up to 17.95% of the collateral may comprise B+ credits (weighted-average non-zero guarantor Beacon Score of 708 as of the Statistical Calculation Date compared with a score of 752 for A credits as of the same date). Automated Clearing House is required on approximately 100% of B+ credit contracts (compared with about 68% for A credit contracts). In addition, as of the Statistical Calculation Date, close to 100% of B+ collateral in the Statistical Asset Pool was supported by personal guarantees (compared with approximately 89% for A credits).
-- Under various stressed cash flow scenarios, credit enhancement can withstand the expected loss using DBRS Morningstar multiples of 5.55 times (x) with respect to the Class A Notes and 4.55x, 3.65x, 2.60x and 1.90x with respect to the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, respectively. DBRS Morningstar assumes a 4.00% expected base case CNL for the transaction.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Equipment Lease and Loan Securitizations, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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