CHICAGO--(BUSINESS WIRE)--Link to Fitch Ratings' Report: GE Equipment Small Ticket,L.L.C., Series 2014-1 (US ABS)
Fitch Ratings assigns the following ratings to the GE Equipment Small Ticket, L.L.C., Series 2014-1 notes:
--$240,250,000 class A-1 'F1+sf';
--$195,000,000 class A-2 'AAAsf'; Outlook Stable;
--$195,000,000 class A-3 'AAAsf'; Outlook Stable;
--$42,000,000 class A-4 'AAAsf'; Outlook Stable;
--$16,350,000 class B 'AAsf'; Outlook Stable;
--$30,350,000 class C 'Asf'; Outlook Stable.
Fitch's stress and rating sensitivity analysis are discussed in the presale report titled 'GE Equipment Small Ticket, L.L.C., Series 2014-1', dated March 31, 2014, which is available on Fitch's web site. The presale report details how Fitch addresses the key rating drivers summarized below.
KEY RATING DRIVERS
High Concentration of OI Equipment: Approximately 90.06% of series 2014-1 is office imaging (OI) equipment collateral, which is comparable to recent securitizations.
Decrease in OI Business Segment: Approximately 72.85% of the pool is from GECC's OI business segment, compared with 89.32% in 2013-1. Loss performance on the OI portfolio has historically been weaker than that of other OI equipment collateral. As a result, Fitch's base case loss expectation has decreased from the prior transaction.
Increase in Booked Residuals: The residual concentration for 2014-1 is 10.75%, up from 8.10% in 2013-1. Higher residual values (RVs) increase the transaction's exposure to residual realization risk. The increase in RVs is primarily due to the increase in seasoning to 11.5 months from 7 months in 2013-1.
Improving Asset Performance: GECC's managed static pool data have experienced improved loss performance for more recent vintages. Furthermore, all transactions issued by GECC have experienced cumulative net losses (CNLs) inside of Fitch's initial expectations.
Quality of Origination, Underwriting and Servicing: GECC has demonstrated adequate abilities as originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.
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 on defaulted receivables could produce CNL levels higher than the base case and would likely result in declines of credit enhancement (CE) and remaining loss coverage levels available to the notes. Decreased CE may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
A similar negative impact on loss coverage can also be expected from a lower than expected residual realization rate on the leases. Hence, Fitch conducts a sensitivity analysis by eliminating any residual realizations benefit and stressing a transaction's initial base case CNL assumption by 1.5x as well as examining the rating implications on all classes of issued notes. These stresses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance. The elimination of the residual realizations benefit, while assuming the base case loss proxy, represents a moderate stress and could result in a downgrade of one rating category for the subordinate notes. Eliminating residual realizations and a 1.5x increase of the base case CNL represents a severe stress and could result in a downgrade to the notes of one to two rating categories.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated March 31, 2014. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'GE Equipment Small Ticket, L.L.C., Series 2014-1'. These R&Ws are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated April 17, 2012.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Equipment Lease and Loan ABS' (Dec. 19, 2013);
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'GE Equipment Small Ticket, L.L.C., Series 2014-1 Presale Report' (March 31, 2014);
--'GE Equipment Small Ticket, L.L.C., Series 2014-1 Presale Report- Appendix' (March 31, 2014);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (April 17, 2012);
--'Structured Finance Tranche Thickness Metrics' (July 29, 2011).
Applicable Criteria and Related Research:
Criteria for Rating U.S. Equipment Lease and Loan ABS
Global Structured Finance Rating Criteria
GE Equipment Small Ticket, L.L.C., Series 2014-1 - Appendix
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended
Structured Finance Tranche Thickness Metrics