DBRS Morningstar Equipment Leasing Snapshot

This inaugural edition of the Equipment Leasing Snapshot is a new DBRS Morningstar semiannual research series dedicated to providing insights on general industry developments as well as collateral performance trends underlying our publicly rated large and small-to-mid-sized equipment leasing securitizations. In addition, we also examine delinquencies as well as cumulative net losses across our rated universe. Highlights include:

-- Economic slowdown has resulted in “normalization” of performance compared with the very strong equipment portfolio metrics across the industry in 2021 and early 2022, with delinquencies increasing starting in the second half of 2022.

-- Despite the rise in delinquencies, they remain roughly at, and for some originators, still lower than the historical pre-pandemic average levels.

-- The performance of large-ticket ABS remains steady, even though some transactions have experienced relatively minor delinquencies for the first time since their respective closing dates.

-- With some exceptions, cumulative net losses remain below or at the level of base expected losses for each transaction.

“It has been a challenging year thus far for the equipment sector against the backdrop of rising interest rates, inflationary pressures, and risk of recession,” said Sergey Moiseenko, Managing Director, U.S. ABS. “Meanwhile, on the securitization side, somewhat tepid issuance earlier this year has picked up steam but is still lagging behind the 2021 and 2022 volumes,” said Stephanie Mah, Senior Vice President, Structured Finance Research.