Auxilior term funding 2026-1 secures provisional Morningstar DBRS ratings on $326.8 million notes

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Auxilior Term Funding 2026-1 ratings

Highlights

Morningstar DBRS assigned provisional ratings up to (P) AAA (sf) on $326.8 million of Auxilior Term Funding 2026-1 notes, including $119.58 million each for Class A-2 and A-3.
The transaction's credit enhancement relies on subordination, overcollateralization, reserves, and excess spread, mitigating an expected cumulative net loss rate of 2.30%.
The collateral pool has a weighted average age of eight months and discounted booked residuals comprise 3.37% of aggregate securitization value, receiving only limited credit in stress scenarios.

Provisional ratings and transaction structure

As reported by Morningstar DBRS, DBRS, Inc. assigned provisional ratings to seven classes of notes to be issued by Auxilior Term Funding 2026-1, LLC, including (P) R-1 (high) (sf) on the $38 million Class A-1 notes and (P) AAA (sf) on both the $119.58 million Class A-2 and Class A-3 notes.

The agency also assigned (P) AA (sf) to the $16.1 million Class B notes, (P) A (sf) to the $20.34 million Class C notes, (P) BBB (sf) to the $8.47 million Class D notes, and (P) BB (sf) to the $4.74 million Class E notes. Morningstar DBRS says the ratings reflect support from subordination, overcollateralization, reserve account balances and excess spread, which together provide credit enhancement against an expected cumulative net loss of 2.30% under multiple stress scenarios.

The collateral pool is only lightly seasoned, with a weighted average age of eight months, and Morningstar DBRS says it did not give seasoning credit in its analysis. Its cash flow review tests whether the structure can meet interest and principal payments under four net loss timing scenarios and in both zero and 12 CPR prepayment environments.

Asset performance and equipment finance market implications

Morningstar DBRS says it also reviews Auxilior's historical asset performance, including two outstanding asset-backed securities transactions, across the company's three main industry verticals. The review includes gross defaults, recoveries and net losses by equipment type, alongside the current collateral composition, to reflect changes in Auxilior's origination mix in response to performance trends.

Auxilior, which has operated since 2020, primarily originates small- and middle-ticket equipment leases and equipment loan contracts through vendor alliances, program relationships and direct ties with end users of commercial equipment. Morningstar DBRS considers the company an acceptable originator and servicer for equipment-backed leases and loans, with Auxilior serving as servicer and administrator and GreatAmerica Financial Services acting as backup servicer.

The agency says the securitization is the company's third Rule 144A term transaction and follows an established legal and structural framework for U.S. structured finance. Morningstar DBRS adds that discounted booked residuals represent about 3.37% of aggregate securitization value as of the initial cut-off date, but only receive limited credit in its cash flow scenarios.

Our earlier coverage of the Bridgecrest Lending Auto Securitization Trust 2026-3 (BLAST 2026-3) deal explained how Morningstar DBRS assigned provisional ratings across seven note classes backed by subprime auto loan receivables, with potential upsizing depending on market conditions. We highlighted the agency’s focus on credit enhancement (including overcollateralization, subordination, reserve funds, and excess spread), stressed loss assumptions, and its assessment of the originator/servicer and standby servicing arrangements.

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