KBRA released research on potential ABS exposure in its rated universe of consumer and commercial ABS to Hurricane Ian, which made landfall along Florida’s southwestern coast on Sept. 28 before making landfall a second time near Georgetown, SC.

Key Takeaways

• Consumer ABS transactions and some traditional commercial ABS asset classes, such as equipment and small business, typically benefit from obligor and geographic diversification.
• Borrowers are generally required to maintain physical damage insurance for secured assets during the term of the loan, which may result in a prepayment or reduce loss severity for damaged collateral. KBRA is reviewing the extent to which insurance may have a role in recoveries and prepayments in transactions.
• As in past storms, KBRA expects many servicers to implement hardship assistance programs for borrowers requesting temporary assistance through payment deferrals and forbearance. We will review the operations and strategy of servicers in managing the aftermath of the storm.
• Transportation segments are well diversified (aircraft and containers are globally diversified, railcars are domestically diversified), mobile, and should not be significantly impacted by the storm as operators may have had sufficient warning to relocate the assets out of the storm’s path.
• Whole business securitizations (WBS) typically comprise franchise restaurant locations (and some non-restaurant concepts) that may be impacted by the temporary or permanent closings of the locations that collateralize the transactions. KBRA will review all WBS ratings, focusing initially on those that may have larger concentrations in the affected areas in Florida.

Click here to view the report.