Morningstar DBRS Takes Credit Rating Actions on Three Pawnee Equipment Receivables LLC Transactions

DBRS, Inc. (Morningstar DBRS) reviewed its credit ratings on 10 classes of notes issued by three Pawnee Equipment Receivables LLC transactions. Of the 10 classes reviewed, Morningstar DBRS confirmed its credit ratings on nine classes and downgraded its credit rating on one class.

CREDIT RATING RATIONALE/DESCRIPTION

Credit rating rationale includes the key analytical considerations.

-- The collateral performance to date and Morningstar DBRS' assessment of future performance. As of the February 2025 payment date, Series 2020-1 has amortized to a pool factor of 1.26%. Losses are tracking below Morningstar DBRS' initial base case CNL expectations. Series 2021-1 has amortized to a pool factor of 17.62%. Losses are tracking slightly above Morningstar DBRS' initial base case CNL expectations. However, the current level of hard credit enhancement is sufficient to support the Morningstar DBRS' projected remaining cumulative net loss assumption at a multiple of coverage commensurate with the credit ratings.

-- Series 2022-1 has amortized to a pool factor of 34.84% and has a current CNL to date of 8.04%. Current CNL is tracking above Morningstar DBRS' revised 2024 base-case loss expectation of 7.02%. Consequently, the revised base-case loss expectation was increased to 9.15%. As of the February 2025 payment date, the current credit enhancement amount for Class E is 4.85%, down from its initial amount of 8.35% at closing. As a result, the current level of hard credit enhancement is insufficient to support the current credit rating on the Class E Notes. Consequently, the credit rating has been downgraded to `B' (sf), commensurate with the current implied multiple. While CNL is tracking above the initial expectation, the Class A-3 Notes, Class B Notes, Class C Notes and the Class D Notes have benefited from deleveraging and have sufficient credit enhancement commensurate with the current credit ratings, and Morningstar DBRS has confirmed the credit ratings on these classes.

-- Pawnee Leasing Corporation recently announced a planned acquisition by North Mill Equipment Finance that is expected to be finalized by the end of March 2025. Based on our conversation with the court appointed restructuring agent, FTI Consulting, servicing of the portfolio is expected to remain generally unchanged. As a result, Morningstar DBRS does not expect significant asset deterioration due to the acquisition but will continue to monitor the progress of the servicing transition.

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

-- The Transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, " Baseline Macroeconomic Scenarios for Rated Sovereigns December 2024 Update," published on December 19, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (January 10, 2025) https://dbrs.morningstar.com/research/445740.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

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

DBRS, Inc.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

Operational Risk Assessment for U.S. ABS Originators and Servicers (December 5, 2024)
https://dbrs.morningstar.com/research/444162

Legal Criteria for U.S. Structured Finance (December 3, 2024)
https://dbrs.morningstar.com/research/444064

Rating U.S. Structured Finance Transactions (March 10, 2025)
https://dbrs.morningstar.com/research/449616

Rating U.S. Equipment Lease and Loan Securitizations (August 6, 2024)
https://dbrs.morningstar.com/research/437575

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.