NEW YORK--()--Fitch Ratings expects to rate GE Equipment Transportation LLC, series 2013-1 as follows:
--$171,000,000 class A-1 notes 'F1+sf';
--$218,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$181,000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$139,450,000 class A-4 notes 'AAAsf'; Outlook Stable;
--$28,457,000 class B notes 'AAsf'; Outlook Stable;
--$28,457,000 class C notes 'Asf'; Outlook Stable.
Key Rating Drivers:
Non-diversified Portfolio: The 2013-1 pool consists of 100% transportation equipment. The significantly high concentration of transportation collateral in the pool reduces equipment and industry diversification, exposing the trust to other factors, which could result in systemic risk.
Volatile Managed Portfolio Performance: GECC's managed transportation portfolio and securitizations have exhibited volatility and higher delinquency and loss performance starting in 2007, due to large obligor defaults and cyclical industry concentrations. However, recent 2010-2012 performance exhibited improvement in delinquencies and losses.
Sufficient Credit Enhancement: Hard credit enhancement (CE) on the notes consists of subordination, overcollateralization (OC), and a cash reserve account. Initial hard CE for the class A, B, and C notes is 11.50%, 7.90%, and 4.30%, respectively. Additionally, the notes benefit from excess spread, expected to be 3.91% per annum.
Stable Origination, Underwriting, and Servicing Platform: GECC has demonstrated sufficient abilities as originator, underwriter, and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio. All securitizations issued and rated by Fitch have performed within initial base case expectations.
Integrity of Legal Structure: The legal structure of the transaction should provide that a bankruptcy of the trust would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults and loss severity could produce loss levels higher than the current projected base case loss proxy and impact available loss coverage and multiples levels. Lower loss coverage could impact ratings and Outlooks, depending on the extent of the decline in coverage.
In Fitch's review of the transaction, the notes were found to have some sensitivity to a 1.5x and 2.5x increase of Fitch's base case loss expectation. Under 1.5x base case loss scenario, the notes could be potentially downgraded by one or two rating categories. While under 2.5x base case loss scenario, the notes could be potentially downgraded by two or more rating categories.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Equipment Lease and Loan ABS' dated December 2012;
--'Global Structured Finance Rating Criteria' dated June 2012;
--'Counterparty Criteria for Structured Finance Transactions' dated May 2012.
Applicable Criteria and Related Research GE Equipment Transportation LLC, Series 2013-1 (US ABS)
Counterparty Criteria for Structured Finance Transactions
Global Structured Finance Rating Criteria
Criteria for Rating U.S. Equipment Lease and Loan ABS