Morningstar DBRS Equipment Leasing Snapshot

Morningstar DBRS' semiannual research series, the Equipment Leasing Snapshot, provides insights on general industry developments as well as collateral performance trends underlying our publicly rated large and small-to-midsize equipment leasing securitizations. We examine delinquencies as well as cumulative net losses (CNLs) across our rated universe. Highlights include the following:

-- Relatively higher rates for longer and tariffs could both be influencing firms to put equipment purchases on the backburner. Select transportation-focused transactions in our rated portfolio continue to exhibit relatively weaker asset performance with slightly elevated delinquencies and losses.

-- Delinquencies have exhibited volatility from month to month but have generally been on the upswing compared with prior-year levels. Likewise, CNLs have also been generally increasing. Volatile trade tensions and an uncertain economic environment may influence firms to postpone investments, while at the same time are also disrupting operations, particularly in the transportation sector.

-- While a trade deal between the U.S. and China was recently reached, trade tensions remain elevated between the U.S. and Canada, as well as with the EU, with those negotiations spilling into the summer. In addition, the latest conflict in the Middle East may also dampen economic prospects with higher energy prices.

"Recovery rates on transportation collateral continue to remain resilient and performance on equipment ABS overall remains stable from a ratings perspective because of their deleveraging structures, with credit enhancement helping to offset a deterioration in underlying collateral credit," said Du Trieu, Senior Vice President, U.S. ABS at Morningstar DBRS.