A pool of loans and leases collateralized by light industrial construction equipment, computers, software and other office equipment, will secure $665.8 million in asset-backed securities, from M&T Equipment, 2023-LEAF1.
The deal is the first for 2023, and the first since 2017, according to ratings analysts from Moody's Investors Service. Known as MTLRF 2023-1 is backed by 32,613 contracts in a highly diversified pool, and most of them, 62.6%, are loans. Other finance assets include 29.8% true leases, and 7.5% finance leases, Moody's said.
On average the contracts have a balance of $26,134, according to the rating agency. Industrial equipment accounted for the plurality, with 22.8%; office equipment accounts for 21.6% and software claims 14.8%. LEAF Commercial Capital is the deal sponsor, asset seller and servicer of MTLRF 2023-1, which has a closing date of August 16.
The notes in the deal's most senior tranche, A-1, has a stated maturity date of Aug. 15, 2024, while the rest of the tranches, from A-2 through class E, have a maturity date of July 15, 2023, says the DBRS Morningstar's pre-sale report on the deal.
As for the transaction's positive attributes, DBRS says that the sponsor LEAF maintains a strong and visible position in the small-ticket lessor business. They provide financing to vendors of commercial equipment through small- to large-sized businesses. Moody's expresses confidence in LEAF's industry position, too, noting that LEAF has a strong and consistent management portfolios.
"Delinquencies and net losses of collateral originated by LEAF have been consistently low since 2009," Moody's ratings analysts wrote, emphasizing that 0.87% of the net invested amount was more than 30 days delinquent as of Dec. 31, 2022.
Yet LEAF's main clients—small- and medium-sized businesses, are more vulnerable to an economic downturn, which is a potential credit negative, Moody's said.
DBRS expects to assign ratings of 'R-1' to the A-1 notes; 'AAA' to classes A-2 through A-4; 'AA' to class B notes; 'A' to class C; 'BBB' to the class D notes and 'BB' to the class E notes. For its part Moody's expects to assign 'P-1' to the A-1 notes; 'Aaa' to the A-2 through A-4 classes; 'Aa2' to the class B notes; 'A1' to the class C notes; 'Baa1' to the class D notes and 'Ba1' to the class E notes.
