CHICAGO--(BUSINESS WIRE)--Fitch Ratings expects to assign the following ratings to the CNH Equipment Trust 2014-C notes:
--$219,000,000 class A-1 'F1+sf';
--$280,000,000 class A-2 'AAAsf'; Outlook Stable;
--$350,000,000 class A-3 'AAAsf'; Outlook Stable;
--$127,587,000 class A-4 'AAAsf'; Outlook Stable;
--$22,479,000 class B 'Asf'; Outlook Stable
Fitch's stress and rating sensitivity analysis are discussed in the presale report titled 'CNH Equipment Trust 2014-C', dated Oct. 8, 2014, which is available on Fitch's website. The presale report details how Fitch addresses the key rating drivers summarized below.
Key Rating Drivers
High AG Concentration: The 2014-C collateral pool consists of 91.51% AG and 8.49% CO. While the 2014-C AG concentration is consistent with CNH Industrial Capital securitizations going back to 2009, the AG concentrations in all these transactions are significantly higher relative to CNH Industrial Capital transactions issued prior to 2009, which consisted of approximately 18%-32% CO.
Consistent Collateral Concentrations: The pool contains 46.23% used equipment and is comparable to the prior transactions, which typically had concentrations ranging from 46.00%-50.00%. Furthermore, the pool consists of 67.88% annual-pay contracts, which historically have experienced a lower level of losses than other payment types.
Sufficient Credit Enhancement: Hard credit enhancement (CE) for the 2014-C transaction is unchanged from the prior eight transactions. Hard CE for class A and class B remains at 4.5% and 2.25%, respectively. Expected excess spread of 1.73% (per annum) is down from 2014-B's 1.91%. These CE levels are sufficient for the structure to support Fitch's initial base case proxy of 1.15% for the rating levels listed above.
Quality Origination, Underwriting, and Servicing: CNH Industrial Capital 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 loss levels higher than the base case and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings to increased losses over the life of the transaction. Fitch's analysis found that the notes display limited sensitivity to increased defaults and losses, showing limited impact on the rating of the notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of at least two rating category under Fitch's severe (2.5x base case loss) scenario.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Oct. 9, 2014. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'CNH Equipment Trust 2014-C - Appendix'. 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:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (April 17, 2012);
--'Criteria for Rating U.S. Equipment Lease and Loan ABS Sector' (Dec. 19, 2013);
--'Structured Finance Tranche Thickness Metrics' (Jul. 29, 2011);
--'CNH Equipment Trust 2014-C Presale Report' (Oct. 8, 2014);
--'CNH Equipment Trust 2014-C Presale Report- Appendix' (Oct. 8, 2014).
Applicable Criteria and Related Research: CNH Equipment Trust 2014-C
Criteria for Rating U.S. Equipment Lease and Loan ABS
Structured Finance Tranche Thickness Metrics
CNH Equipment Trust 2014-A (US ABS)
CNH Equipment Trust 2014-A -- Appendix
Global Structured Finance Rating Criteria
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions