Kroll Bond Rating Agency assigned preliminary ratings to five classes of notes issued by Dext ABS 2023-2, LLC (Dext 2023-2), the fourth equipment ABS transaction sponsored by Dext Capital, an independent equipment finance company focused primarily on financing medium- and small-ticket medical equipment.
Dext Capital, founded in 2018 and headquartered near Portland, OR, is majority owned by Sightway Capital, the private equity division of Two Sigma. Dext Capital has grown originations since inception using three origination channels, including vendor, direct and capital markets. As of Sept. 30, Dext Capital’s portfolio totaled $669 million in total gross receivables across 4,093 contracts and 3,437 obligors.
As of the Oct. 31 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 terms of 48 months and 44 months, respectively. The aggregate undiscounted residual value is equal to $1 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% 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 6.5% of the initial aggregate contract principal balance and is non-amortizing after reaching this target level. The reserve account is funded at 1% of the initial aggregate contract principal balance and is non-amortizing.
