A pool of revenues from contracts on small- and medium-ticket medical equipment will secure $292.3 million in notes from the Dext ABS 2023-1 transaction, due to close near the end of April.
The contracts finance a range of items, but medical office technology, aesthetic lasers, surgical equipment and other, non-healthcare related account for the top five equipment types by percentage of the aggregate contract principal balance, according to Kroll Bond Rating Agency. That principal amount is actually $306,111, with 1,564 contracts contributing payments.
The remaining equipment types in the top 10 appear to be used in practices offering cosmetic or aesthetic services, KBRA said. The pool is highly diversified, with the top five obligors accounting for 17.42% of the deal's aggregate contract principal balance, the rating agency said.
Asset Securitization Report's deal database notes that BofA Merrill Lynch and SunTrust will act as managers on the deal, which will issue notes through five classes of notes.
KBRA says the notes benefit from initial hard credit enhancement ranging from 19.6% on the A-1 notes through 5.50% on the class D notes. Excess spread and overcollateralization also shore up the notes, according to KBRA. The rating agency notes that the reserve account is funded at 1.00% of the aggregate contract principal balance and is non-amortizing. Instead, it will increase as a percentage of the aggregate contract principal balance over time.
Collateral in the Dext 2023-1 differs from the program's 2021-1 deal in a number of ways, such as an average contract balance of $195,723, much lower than the $300,238 in the 2021-1 deal. Top obligors in the 2023-1 transaction also have higher credit quality, with three of the top four obligors having investment grade credit quality, compared with only one top obligor from the 2021-1 deal.
Account holders from Florida have also shifted a couple of pool characteristics. Obligors from that state account for a 19.2% concentration of the aggregate contract principal balance, up from 9.4%. That is largely because bought out a specialty health small-ticket sales team in December 2021. Also, the inclusion of a non-profit hospital system in Florida is the top obligor in the field, another factor that raised Florida's presence in the pool.
KBRA expects to assign ratings of 'K1+' to the A-1 notes; 'AAA' to the $163 million, A-2 notes, the bulk of the deal; 'AA' to the class B notes; 'A' to the class C notes; and 'BBB' to the class D notes.
