Dext Capital is returning to sponsor another securitization of loans and leases on medical equipment, its financing specialty, in a bid to raise $245 million from investors.
The Lake Oswego, Ore.-based company has only been originating equipment contracts since 2018, says Moody's Investors Service, whose ratings analysts assessed the notes. It's a short track record, but the company has a managed portfolio that has had only 0.3% in average annual net losses to date. Further, Moody's said, whenever the company had defaults on its portfolio, it attained more than 70% recovery for most of them since 2018.
Further, on its three outstanding securitizations since 2020 Dext's net losses have been zero to date, Moody's said. The current transaction will issue five tranches of notes, lending subordination to the deal, and they all have the same May 15, 2034 legal final maturity date.
Kroll Bond Rating Agency notes that Truist Securities is sole structuring agent and lead bookrunner on DEXT 2023-2. Bank of America Merrill Lynch and SunTrust Robinson Humphrey are managers on the current deal, DEXT 2023-2, which is expected to close on November 28, according to Asset Securitization Report's deal database.
Aside from Dext's managed portfolio, the deal has several credit highlights in its favor. For one, the pool is very diversified by equipment type. Enterprise technology, medical technology and surgical equipment account for the top three concentrations in the pool, representing 22%, 16% and 10% of the portfolio, respectively.
DEXT 2023- 2 has several other characteristics working in its credit favor, aside from the deal structure. The transaction also benefits from a reserve account amounting to 1.0% of the initial pool balance, and excess spread. While initial overcollateralization is at 5.4%, it will build to a target of 6.5% of the outstanding pool balance, as all available funds will be used to pay down the notes sequentially.
Moody's expects to assign ratings of 'P1' to the A1 notes; 'Aaa' to the A2 notes; 'Aa1' to the class B notes; and 'A3' to the class C. KBRS, meanwhile, will assign 'K1+' to the A1 notes; 'AAA' to the A2 notes; 'AA+' to the class B notes; 'A' to the class C notes; and 'BBB' to the class D notes.
