New York, December 19, 2017 — Moody’s Investors Service has upgraded one security and affirmed three securities from SCF Equipment Leasing 2017-1 LLC. The transaction is a securitization of equipment loans and leases sponsored by Stonebriar Commercial Finance LLC. Stonebriar also acts as the servicer for the transaction. The equipment loans and leases are backed by a diverse pool and includes railcars, commercial equipment, and corporate aircraft.
The complete rating actions are as follow:
Issuer: SCF Equipment Leasing 2017-1 LLC
Equipment Contract Backed Notes, Class A, Affirmed A1 (sf); previously on Feb 23, 2017 Definitive Rating Assigned A1 (sf)
Equipment Contract Backed Notes, Class B, Upgraded to Baa1 (sf); previously on Feb 23, 2017 Definitive Rating Assigned Baa3 (sf)
Equipment Contract Backed Notes, Class C, Affirmed Ba1 (sf); previously on Feb 23, 2017 Definitive Rating Assigned Ba1 (sf)
Equipment Contract Backed Notes, Class D, Affirmed B3 (sf); previously on Feb 23, 2017 Definitive Rating Assigned B3 (sf)
The upgrade was prompted by an increase in credit enhancement due to the sequential pay structure, overcollateralization and non-declining reserve account. The transaction features an overcollateralization target of 10.25% of the original pool balance.
The collateral pool consists of a concentrated number of obligors, some of which are not rated by Moody’s. To date, the transaction has exhibited strong performance with no cumulative net loss (CNL) to date.
Below are key performance metrics (as of November 2017 distribution date) for the affected transaction. Performance metrics include pool factor which is the ratio of the current collateral balance and the original collateral balance at closing; and total hard credit enhancement (expressed as a percentage of the outstanding collateral pool balance) which typically consists of subordination, overcollateralization, reserve fund as applicable.
Issuer – SCF Equipment Leasing 2017-1 LLC
Pool factor — 87.08%
Total Hard credit enhancement — Class A — 32.61%; Class B — 27.27%; Class C — 21.99%; Class D — 13.49%
The principal methodology used in these ratings was “Moody’s Approach to Rating ABS Backed by Equipment Leases and Loans” published in December 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Levels of credit protection that are greater than necessary to protect investors against current expectations of loss could lead to an upgrade of the rating. Moody’s current expectations of loss may be better than its original expectations because of lower frequency of default by the underlying obligors or appreciation in the value of the equipment that secure the obligor’s promise of payment. As the primary drivers of performance, positive changes in the US macro economy and the performance of various sectors where the lessees operate could also affect the ratings. Other reasons for better performance than Moody’s expected include changes in servicing practices to maximize collections on the loans and leases or refinancing opportunities that result in a prepayment of the loan.
Levels of credit protection that are insufficient to protect investors against current expectations of loss could lead to a downgrade of the ratings. Moody’s current expectations of loss may be worse than its original expectations because of higher frequency of default by the underlying obligors or a deterioration in the value of the equipment that secure the obligor’s promise of payment. As the primary drivers of performance, negative changes in the US macro economy could also affect Moody’s ratings. Other reasons for worse performance than Moody’s expectation include poor servicing, error on the part of transaction parties, lack of transactional governance and fraud.