Fitch Expects to Rate GreatAmerica Leasing Receivables Funding, LLC, Series 2022-1

Fitch Ratings - New York - 28 Sep 2022: Fitch Ratings expects to assign ratings and Rating Outlooks to the notes issued by GreatAmerica Leasing Receivables Funding, L.L.C., Series 2022-1 (GALC 2022-1).

KEY RATING DRIVERS

Collateral/Obligor Performance; High Copier/Printer Concentration: 62.4% of GALC 2022-1 consist of copiers/printers (also known as office imaging equipment), which is down from 2021-2 (67.6%). The decrease in copier concentration is in line with industry trends due to post-pandemic working from home conditions, and this concentration is expected to gradually decrease going forward. Despite the high concentration, copiers/printers have historically performed better than other equipment types within GreatAmerica's portfolio.

Forward-Looking Approach to Derive Base Case Loss Proxy; Strong Managed Portfolio/ABS Performance: GreatAmerica's managed static pool continues to demonstrate strong and stable cumulative net loss (CNL) performance, with CNLs tracking well below those of peak recessionary vintages. All but one of the GreatAmerica securitizations have experienced CNLs within Fitch's initial expectations. Fitch utilized the 2006-2009, along with the 2017-2018, managed portfolio vintages and prior ABS performance to derive the CNL loss proxy of 2.40%. This proxy is in line with 2021-2 and pre-pandemic levels, as it considers a potentially softening in economic conditions over the next year.

Structural Analysis — Sufficient Credit Enhancement (CE): All classes benefit from a cash reserve account and overcollateralization (OC). Total initial hard CE for class A, B and C notes is unchanged since 2018-1 at 12.00%, 8.25% and 5.75%, respectively. Additionally, all classes benefit from 4.3% in booked residuals.

Stable Origination/Underwriting/Servicing: GreatAmerica has demonstrated adequate abilities as originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Unanticipated increases in the frequency of defaults could produce CNL levels higher than the base case and would likely result in declines of CE and remaining net loss coverage levels available to the notes. Additionally, unanticipated declines in recoveries could also result in lower net loss coverage, which may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.

Fitch conducts sensitivity analyses by stressing both a transaction's initial base case CNL and recovery rate assumptions and examining the rating implications on all classes of issued notes. The CNL sensitivity stresses the CNL proxy to the level necessary to reduce each rating by one full category, to non-investment grade (BBsf) and to 'CCCsf', based on the break-even loss coverage provided by the CE structure.

Additionally, Fitch conducts 1.5x and 2.0x increases to the CNL proxy, representing both moderate and severe stresses, respectively. Fitch also evaluates the impact of stressed recovery rates on an equipment ABS structure and rating impact with a 50% haircut. These analyses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a transaction's performance.

Fitch has revised global economic outlook forecasts as a result of the Ukraine war and related economic sanctions. Downside risks have increased, and Fitch published an assessment of the potential rating and asset performance impact of a plausible, but worse-than-expected, adverse stagflation scenario on Fitch's major SF and CVB subsectors (see "What a Stagflation Scenario Would Mean for Global Structured Finance" at www.fitchratings.com).

Fitch expects the equipment lease/loan ABS sector in the assumed adverse scenario to experience 'Virtually No Impact' on ratings performance, indicating very few (less than 5%) rating or Outlook changes. Fitch expects "Virtually No Impact" on asset performance, indicating asset performance to remain broadly unaffected, and less than a 10% likelihood of sector Outlook revision by YE 2023. Fitch expects the asset performance impact of the adverse case scenario to be more modest than the scenario described above which increases Fitch's CNL proxy by 2.0x.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and consideration for potential upgrades. If CNL is 20% less than the projected proxy, the expected ratings for the subordinate notes could be maintained for class A and upgraded by one rating category for each of the class B and C notes.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by KPMG LLP. The third-party due diligence described in Form 15E focused on comparing or re-computing certain information with respect to 150 lease contracts from the collateral pool of assets for the transaction. Fitch considered this information in its analysis and it did not have an effect on Fitch's analysis or conclusions.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• ABS Loss Forecaster Model, v1.2.0 (1)

• Multi-Structure Cash Flow Model, v1.3.0 (1)

ADDITIONAL DISCLOSURES

• Dodd-Frank Rating Information Disclosure Form
• ABS Due Diligence Form 15E 1
• Solicitation Status
• Endorsement Policy

ENDORSEMENT STATUS