DBRS Morningstar Takes Rating Actions on Two Pawnee Equipment Receivables Transactions

DBRS, Inc. (DBRS Morningstar) confirmed six ratings and upgraded four ratings on the following classes of securities included in two Pawnee Equipment Receivables transactions.

Pawnee Equipment Receivables (Series 2019-1) LLC:
-- Class A-2 Notes, confirmed at AAA (sf)
-- Class B Notes, upgraded to AAA (sf) from AA (high) (sf)
-- Class C Notes, upgraded to AA (low) (sf) from A (high) (sf)
-- Class D Notes, upgraded to A (sf) from BBB (high) (sf)
-- Class E Notes, upgraded to BBB (sf) from BB (high) (sf)

Pawnee Equipment Receivables (Series 2020-1) LLC:
-- Class A Notes, confirmed at AAA (sf)
-- Class B Notes, confirmed at AA (sf)
-- Class C Notes, confirmed at A (sf)
-- Class D Notes, confirmed at BBB (sf)
-- Class E Notes, confirmed at BB (sf)

The rating actions are based on the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary titled “Baseline Macroeconomic Scenarios For Rated Sovereigns,” published on September 8, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that, although the pandemic remains a risk to the outlook, uncertainty around the macroeconomic effects of the pandemic has gradually receded. Current median forecasts considered in the baseline macroeconomic scenarios incorporate some risks associated with further outbreaks but remain fairly positive on recovery prospects given expectations of continued fiscal and monetary policy support. The policy response to the coronavirus may nonetheless bring other risks to the forefront in the coming months and years.

-- The currently available hard credit enhancement in the form of overcollateralization, subordination (as applicable), and amounts of deposit in the cash reserve account, as well as the change in the level of protection afforded by each form of credit enhancement since the closing of each transaction.

-- The collateral performance on the transactions are within expectation with low levels of cumulative net loss to date.

-- Given the expectation of a generally improving economic environment and the strong rebound in delinquency and charge-off performance metrics for equipment lessors following the initial negative impact from the coronavirus, DBRS Morningstar removed its adjustment to its expected cumulative net loss assumption in consideration of the impact from the pandemic.

-- The relative benefit from obligor and geographic diversification of collateral pools.

-- The transaction parties’ capabilities with regard to originating, underwriting, and servicing.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
The principal methodology is DBRS Morningstar Master U.S. ABS Surveillance (May 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The rated entity or its related entities did not 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.

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

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