KBRA Assigns Preliminary Ratings to Dext ABS 2023-2, LLC

KBRA assigns preliminary ratings to five classes of notes issued by Dext ABS 2023-2, LLC (Dext 2023-2) an equipment ABS transaction.

Dext 2023-2 represents the fourth equipment ABS transaction to be sponsored by Dext Capital, LLC (Dext or the Company). Dext, founded in 2018 and headquartered near Portland, Oregon, is an independent equipment finance company focused primarily on financing medium- and small-ticket medical equipment. Dext is majority owned by Sightway Capital, the private equity division of Two Sigma. The Company has grown originations since inception using three origination channels including vendor, direct and capital markets. As of September 30, 2023, Dext’s portfolio totaled $669 million in total gross receivables across 4,093 contracts and 3,437 obligors.

As of the October 31, 2023 statistical cutoff date, the pool of equipment contracts backing Dext 2023-2 has an aggregate contract principal balance of $245.2 million, based on a 9.4% statistical discount rate (Statistical Pool). The Statistical Pool includes 1,754 contracts, with an average contract balance of $139,772 and original and remaining lease term of 48 months and 44 months, respectively. The aggregate undiscounted residual value is equal to $1.0 million or 0.42% of the aggregate contract principal balance. The majority of the Statistical Pool is made up of contracts financing medical equipment. The top three obligors have concentrations greater than 2.0% each, with the top obligor representing 2.9%. Two of the top three obligors have investment-grade credit characteristics. The Statistical Pool is diversified geographically with the largest state, California, representing approximately 15.9% and all other states at less than or equal to 8.8% each. The Statistical Pool benefits from a weighted average obligor time in business of 26 years.

Dext ABS 2023-2, LLC will issue five classes of notes. Credit enhancement is comprised of overcollateralization, a cash reserve, subordination benefiting senior classes and excess spread. The overcollateralization is subject to a target equal to 6.50% of the initial aggregate contract principal balance and is non-amortizing after reaching this target level. The reserve account is funded at 1.00% of the initial aggregate contract principal balance and is non-amortizing.

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Related Publications

• Equipment Lease & Loan Global ABS Methodology
• Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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