DBRS Comments on Its Rating of the First Transaction Closed under the Canadian Secured Credit Facility (CSCF) Program

On November 30, 2009, DBRS finalized the ratings on what it believes to be the first transaction to close under the Canadian Secured Credit Facility (CSCF): CNH Capital Canada Wholesale Trust’s Series CW2009-1, Class A Notes (rated AAA). DBRS considers this transaction to be a positive step for the Canadian equipment and auto asset-backed securities (ABS) market

Under the CSCF program, which provides up to $12 billion in support of the financing of vehicles and equipment, the $300 million Series CW2009-1, Class A Notes were purchased by the Business Development Bank of Canada (BDC).

Since it is a requirement that any notes purchased by the BDC under the CSCF program be rated AAA, only the Series CW2009-1, Class A Notes are eligible. The Series CW2009-1, Class B Notes (rated “A”) were issued privately by CNH Capital Canada Wholesale Trust as subordinated notes in the structure.

BACKGROUND OF THE CSCF
The CSCF program was created in the 2009 federal budget, announced in the Speech from the Throne on January 26, 2009, as part of a response to improve access to financing for Canadian households and businesses in the face of a harsh economic climate. The rollout of the program, the first of its kind in Canada, was further clarified in a May 8, 2009, announcement by Canada’s Department of Finance, with comments from Industry Minister Tony Clement: “The key objective of the CSCF is to ensure access to credit for businesses and consumers, which is important to the auto industry at this critical time. At the same time, this measure will help stimulate Canada’s manufacturing sector as the CSCF supports the sales of vehicles and heavy equipment.”

The final phase of the program was settled on September 17, 2009, when revised pricing and access terms were announced by the BDC: “CSCF funds will be offered on a ‘first-come, first-served’ basis until March 31, 2010, to provide continued support for participants in the auto and equipment financing sectors. . . . The facility is offered to all participants at 1.50 per cent (150 basis points) above Government of Canada funding costs.”

EQUIPMENT FLOORPLAN FINANCING
The launch of the CNH Capital Canada Wholesale Trust transaction is noteworthy as it provides access to financing for equipment floorplan loans, which will help provide additional funding at competitive rates to agricultural and construction equipment dealers in Canada.

The transaction is also noteworthy in that it marks the first Canadian ABS floorplan issuance by an equipment manufacturer since 2006. Other securitization transactions eligible under the program include retail auto loans, retail auto leases, auto floorplan and retail equipment loans and leases.

In rating the transaction, DBRS applied its wholesale floorplan methodology. The CNH Capital Canada Wholesale Trust rating report is available at www.dbrs.com. DBRS will continue to monitor and report on the transaction.