DBRS Finalizes Provisional Ratings on BCC Funding XIV LLC, Equipment Contract Backed Notes, Series 2018-1

DBRS, Inc. (DBRS) finalized its provisional ratings on the following classes of the equipment contract-backed notes issued by BCC Funding XIV LLC (the Issuer):

-- $73,500,000 Series 2018-1, Class A-1 Notes at R-1 (high) (sf)
-- $140,447,000 Series 2018-1, Class A-2 Notes at AAA (sf)
-- $20,376,000 Series 2018-1, Class B Notes at AA (low) (sf)
-- $11,745,000 Series 2018-1, Class C Notes at A (low) (sf)
-- $13,442,000 Series 2018-1, Class D Notes at BBB (low) (sf)
-- $6,934,000 Series 2018-1, Class E Notes at BB (sf)

The ratings are based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure, proposed ratings and sufficiency of available credit enhancement, which includes overcollateralization (OC), subordination and amounts held in the reserve account, to support the DBRS-projected cumulative net loss assumption under various stressed cash flow scenarios.
-- The concentration limits mitigating the risk of material migration in the collateral pool’s composition during the approximately three-month prefunding period.
-- The capabilities of Balboa Capital Corporation (BCC) with regard to originations, underwriting and servicing. DBRS has performed an operational review of BCC and considers the entity to be an acceptable originator and servicer of equipment-backed lease and loan contracts. In addition, Portfolio Financial Servicing Company, an experienced servicer of equipment lease-backed securitizations, is the backup servicer for the transaction.
-- The collateral for the transaction is granular with respect to obligor, vendor and geographical concentrations. More than 81.0% of the obligors have been in business for six or more years and approximately 42.5% have been in business for 16 or more years. The weighted-average Small Business Scoring Service (SBSS) scores for the businesses in the collateral pool will be at least 201.5. In addition, obligations comprising more than 75.0% are supported by personal guarantees, and the payments on obligations accounting for approximately 89.1% are collected through Automated Clearing House (ACH).
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with BCC, that the trustee has a valid first-priority security interest in the assets and the consistency with the DBRS “Legal Criteria for U.S. Structured Finance.”

BCC provides equipment and working capital financing to small- and mid-sized companies in the United States. It originates leases and loans through three principal channels: (1) vendor financing through partnerships with equipment vendors, (2) small-ticket originations through direct calling and (3) larger small-ticket direct originations to middle-market obligors.

The rating on the Class A-1 Notes reflects 75.5% of initial hard credit enhancement (as a percentage of collateral balance) provided by the subordinated notes in the pool (68.2%), the Reserve Account (1.50%) and OC (5.85%). The rating on the Class A-2 Notes reflects 25.9% of initial hard credit enhancement provided by the subordinated notes in the pool (18.6%), the Reserve Account (1.50%) and OC (5.85%). The ratings on the Class B, Class C, Class D and Class E Notes reflect 18.7%, 14.6%, 9.8% and 7.4% of initial hard credit enhancement, respectively.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Equipment Lease and Loan Securitizations, which can be found on dbrs.com under Methodologies.

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.