KBRA: Railcar Asset-Backed Securities Picking Up Speed

Kroll Bond Rating Agency (KBRA) published research that provides an overview of the railcar sector, prospects for future issuance and KBRA rating performance. This research found that primary market volumes for railcar asset-backed securities 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 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, according to KRBA.

Based on modest growth in the sector and anticipated repayment dates of the outstanding securitizations, KBRA expects roughly $500 million of new issuance over the remainder of 2023 and the first half of 2024.

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