KBRA releases research that provides an overview of the railcar sector, prospects for future issuance, and KBRA rating performance.

Primary market volumes for railcar asset-backed securities (ABS) peaked in 2021, but volumes have fallen significantly over the past two years as the relationship between rising interest rates and asset yields has made refinancing less attractive. However, the performance of outstanding deals has remained positive, with rising debt service coverage ratios (DSCR) and utilization rates as well as limited rating downgrades. The sector has also experienced rising lease rates, which should offset higher funding costs and help to boost new issue volumes in 2024. Based on modest growth in the sector and anticipated repayment dates of the outstanding securitizations, we expect roughly $500 million of new issuance over the remainder of 2023 and 1H 2024.

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KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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