DBRS Finalizes Provisional Ratings on CNH Capital Canada Receivables Trust Series 2011-1 Class A and Class B Notes

DBRS has today finalized the provisional ratings of AAA (sf) on the Class A-1 Receivable-Backed Notes, Series 2011-1 and the Class A-2 Receivable-Backed Notes, Series 2011-1 (collectively, the Class A Notes) and “A” (sf) on the Class B Receivable-Backed Notes, Series 2011-1 (the Class B Notes; collectively, with the Class A Notes, the Notes) issued by CNH Capital Canada Receivables Trust (the Trust).

On closing, the Trust acquired title and interest in a pool of receivables originated by CNH Capital Canada Ltd. (CNH Capital). The Notes are pass-through securities and amortize monthly in line with portfolio collections. The ratings incorporate the following considerations:

(1) Historically low and consistent annual credit loss levels as a percentage of average net portfolio outstanding, ranging from a low of 0.08% to a high of 0.54% since 2007. (Portfolio performance statistics and initial portfolio characteristics are provided in Appendix 2 of the report.)

(2) The high level of initial and building credit enhancement (which increases as the amortizing Notes are repaid) provided by the subordinated Class B Notes at 2.5% of the Class A Notes to be issued, an initial Spread Account of 2.6% (building to 3.5%) of the total Note issuance and an initial estimated excess interest rate spread of approximately 2.71%.

(3) Strong CNH Global N.V. (CNH Global) brand allegiance and support in the resale market for the related equipment, resulting in improved recovery values, if required.

(4) A well-diversified portfolio with respect to obligor concentrations (largest single-obligor concentration limit of 1.0%); a weighted-average remaining term of 53.1 months, representing approximately six months of seasoning; and, taking into consideration the asset class, a balanced geographic representation across Canada.

(5) A ready backup servicer available to act as a replacement servicer, with $500,000 in an Eligible Account funded at closing to offset any costs associated with the transition to the backup servicer.

(6) The offering follows a stable structure from a seasoned originator, which provides consistency with respect to customer profile, receivable stratifications and performance expectations with the Trust’s most recently issued Series 2010-1.

Stress tests using assumptions, including replacement servicer fees and large increases in delinquency and credit losses, indicate that credit enhancement provides sufficient protection to the Notes to warrant the ratings assigned.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Canadian Equipment Finance Securitization, which can be found on our website under Methodologies.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.