Executive Summary
This report describes KBRA’s rating methodology for rating equipment lease and loan asset-backed securities (ABS). Leasing provides companies with a flexible, cost-effective way to finance equipment, while mitigating the technological obsolescence risk associated with ownership.
KBRA’s rating of an equipment-backed receivable securitization incorporates the originator’s and servicer’s operational strength, the quality and expected performance of the underlying assets, and an analysis of the transaction’s structure.
Key areas of focus in KBRA’s process used to rate equipment lease ABS include:
- The originator’s and servicer’s operational strength and quality;
- The composition and quality of the securitized assets; and
- The transaction structure and legal documentation.
KBRA first reviews the operational strength of the originator and servicer. In most equipment lease ABS, the sponsoring leasing company acts as both the contract originator…