Bankrupt medical equipment lessor DVI Inc. reported cash shortfalls in four of its nine outstanding securitization trusts and a slim surplus on an aggregate basis, according to records filed with the Securities and Exchange Commission. The shortfalls, experienced in the series 2000-1, 2000-2, 2002-2 and 2003-1 transactions, are relatively small, however, and are not seen as leading to a major principal loss for investors, sources said.

"The larger concern right now is the defaulted contracts within the trusts and whether the servicer will recoup cashflows that are greater than 180 days past due," one DVI ABS holder said.

The largest shortfall was seen in the final transaction DVI sold prior to filing for Chapter 11 Bankruptcy protection last August, series 2003-1, which is $226,639 short, or 0.41% of total cash collections from last August through January 2004. Series 2002-2 is $86,435 short, or 0.135% of collections; series 2000-1 is $59,957 short, or 0.285%; and series 2000-2 is $47,330 short, or 0.209%.

The losses, however, are offset on a collective basis, due to the surpluses in the 1999-1, 1999-2, 2001-1, 2001-2 and 2002-1 series. The largest surplus was seen in the series 2001-2 transaction, which came in $426,636 over cash collections. Overall, the nine trusts show a slim $59,884 surplus, or 0.019% of total collections, the servicer reports.

The numbers, for the most part, conform to the estimates offered by replacement servicer, US Bank N.A. unit Lyon Financial, reported earlier this year (see ASR 3/8/04). The series with the greatest variance between the March estimates and the actual surplus or shortfall was seen in the oldest transactions.

For example, series 1999-1 was initially expected to be more than $246,000 in the black, when in actuality it shows just a $1,014 surplus. Series 1999-2 was initially expected to be $26,000 short, but showed a $5,700 surplus. Also, the series 2000-1 deal, initially estimated to show a $49,000 surplus, was actually nearly $60,000 in the red.

As anticipated, the most recent securitization had the greatest cash shortfall, more than $226,000, versus initial estimates of a $137,000 deficit. The two transactions that priced in 2002 showed a greater-than-expected surplus for series 2000-1 ($32,900 actual versus $11,762 estimate) and the shortfall for series 2002-2 ($86,435 actual versus $57,333 estimate).

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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