DBRS Confirms and Upgrades Ratings on CIT Canada Equipment Receivables ULC

DBRS has today confirmed the Series 2012-1, Class A-2 Asset-Backed Notes (the Senior Notes) issued by CIT Canada Equipment Receivables ULC (the Trust) at AAA (sf) and has upgraded the Series 2012-1, Class B Asset-Backed Notes (the Subordinated Notes, collectively with the Senior Notes, the Notes) to AA (sf) from A (sf).

The confirmation and upgrade are part of DBRS’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

The rating actions are based on the following factors:

(1) Protection to the Notes comes from a non-amortizing cash reserve that has grown from 3.25% at inception to 8.99%. In addition, the Senior Notes have preferential access to collections arising from the subordination of the Class B Asset-Backed Notes. As of February 2014, credit enhancement available to the Senior Notes has grown from 9.25% to 25.58% of the Notes outstanding balance, while credit enhancement for the Subordinated Notes has grown to 8.99%.

In addition, the Notes are protected by excess spread of approximately 5.6% on an annualized basis (net of Replacement Servicer and Backup Servicer fees).

(2) The collateral also includes $320,000 on deposit at an eligible institution available to pay transition costs incurred to appoint a Replacement Servicer should one be required

(3) The significant experience of CIT Canada and its U.S. parent, CIT Group Inc. (rated BB), in the origination and servicing of equipment loans and leases.

(4) A diverse and well-seasoned portfolio from an obligor-, industry- and geographic-concentration perspective. Additionally, there is no residual value exposure included in the pool of assets.

(5) Performance guarantee provided by CIT Canada’s parent, CIT Group Inc.

DBRS monitors the performance of the transaction to identify any deviation from DBRS’s expectation at issuance and to ensure that the ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of the equipment finance portfolio and the Notes are available and updated each month in the Monthly Canadian ABS Report (see Related Research at the right of the screen).

For more detailed information on the transaction structure, please refer to the rating reports of the Trust at www.dbrs.com.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are 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.

The applicable methodologies are Canadian Structured Finance Surveillance, Rating Canadian Equipment Finance Securitization Transactions and Legal Criteria for Canadian Structured Finance, which can be found on our website under Methodologies.