DBRS Publishes Updated Methodology for Rating U.S. Equipment Lease and Loan Securitizations

DBRS has today published an updated methodology titled, “Rating U.S. Equipment Lease and Loan Securitizations” (the Methodology). The Methodology provides an analytical framework for reviewing equipment lease and loan securitizations in the United States, which include:

-- Quality of originations, underwriting practices and portfolio management;
-- Quality of servicing capabilities;
-- Collateral quality analysis;
-- Capital structure, target ratings and credit enhancement;
-- Cash flow scenario analysis; and
-- Legal structure and opinions.

The Methodology’s updates include:
-- Revisions to the ranges for multiples, which are applied to the expected loss assumption in DBRS cash flow analysis for each rating category, and discusses qualitative considerations influencing the analyst’s choice of the stress multiple within the range for each rating level.
-- Additional clarity on application of collateral seasoning adjustments.
-- Eliminates prescribed haircuts to the base case recovery rate assumptions by rating level.
-- Eliminates previously used obligor coverage test for the collateral pools with significant obligor concentrations; supplements available analytical approaches by adopting the DBRS CLO Asset Model for reviewing such pools.
-- Additional clarity related to the analysis of broker and geographic concentrations.
-- Revisions to the section discussing the DBRS operational risk review process.

DBRS has also published its new stressed forward interest rate curves per its new “Unified Interest Rate Model for U.S. Equipment Lease and Loan Securitizations” that sets forth a consistent platform for the application of interest rate stresses applied across all U.S. equipment lease and loan ABS ratings.

The Methodology, effective as of the date of this press release, supersedes any previous methodologies. While DBRS considers this methodology update to be a material change due to the significant level of new detail, the elimination of the obligor coverage test and the adoption of the DBRS CLO Asset Model, it remains consistent with methods generally used by DBRS to assess commercial exposure in the United States. Accordingly, this methodology release does not result in any rating changes or other rating actions.

DBRS criteria and methodologies are publicly available on its website. http://www.dbrs.com/methodologies

For more information on ratings for equipment lease and loan securitizations, visit www.dbrs.com or contact us at info@dbrs.com.