DLLST 2024-1 notes affirmed by Fitch with stable outlook

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DLLST 2024-1 affirmed by Fitch

Highlights

Fitch affirmed DLLST 2024-1 notes with a Stable Outlook, citing rising hard credit enhancement and cumulative net losses (1.62%) below the 2.30% proxy.
60-plus-day delinquencies stand at 1.81% and Fitch maintains its base case loss expectation at 2.00% based on September 2026 economic projections.
Loss coverage multiples for class A notes remain above 5.0x, with risk exposure limited by obligor concentrations and robust modeling supporting AAAsf ratings.

Performance metrics support affirmation

As reported by Fitch Ratings, the affirmation reflects available credit enhancement and loss performance to date, with cumulative net losses tracking inside the initial rating case cumulative net loss proxy and hard credit enhancement rising for all outstanding classes since closing.

Fitch says the outstanding class A notes show loss coverage levels consistent with AAAsf ratings. The Stable Outlook reflects the agency's expectation that the classes have sufficient credit protection to withstand potential deterioration in portfolio credit quality under stress scenarios, while loss coverage continues to increase as the transaction amortizes.

Fitch kept its updated rating case cumulative net loss proxy at 2.30%, unchanged from closing, using projections based on current performance and what it describes as conservative assumptions for the current economic environment. The agency also says cash flow modeling shows the class A notes can support implied multiples above 5.0x, while obligor concentrations remain consistent with initial levels, limiting concentration risk exposure.

Delinquencies, losses and downside risks

As of the September 2026 servicer report, 60-plus-day delinquencies stand at 1.81% and cumulative net losses are 1.62%, both below the 2.30% rating case cumulative net loss proxy. Fitch also places its base case loss expectation at 2.00%, based on its Global Economic Outlook from September 2026 and historical securitization performance.

The agency says higher-than-expected defaults and loss severity could weaken available loss coverage and ratings multiples, potentially pressuring the ratings and outlooks depending on the scale of deterioration. Fitch adds that the transaction initially showed limited sensitivity to a 1.5x and 2.0x increase in the rating case loss proxy, and that a material deterioration in collateral performance would be required to negatively affect the outstanding ratings.

Fitch also evaluates stressed recovery rates on the equipment ABS structure using a 50% haircut to indicate rating sensitivity to unexpected trust performance deterioration. No upside sensitivity was run because the notes already hold their highest achievable rating of AAAsf with a Stable Outlook.

Our earlier coverage of Fitch’s BBB- rating on Hainan Rubber’s proposed subordinated perpetual sustainable securities explained how the notes’ lower ranking in the capital structure and coupon-deferral flexibility drove the rating outcome. We also outlined Fitch’s view of the group’s high leverage, liquidity position, and the state-support framework underpinning its funding access—key context for how the agency gauges protection against downside scenarios.

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