DBRS Finalizes Provisional Ratings to CNH Capital Canada Receivable-Backed Notes, Series 2015-1

DBRS Limited (DBRS) has today finalized the following provisional ratings to the CNH Capital Canada Receivable-Backed Notes, Series 2015-1, issued by CNH Capital Canada Receivables Trust (CNH CCRT or the Trust):

-- AAA (sf) to the Class A-1 Receivable-Backed Notes, Series 2015-1 (the Class A-1 Notes)
-- AAA (sf) to the Class A-2 Receivable-Backed Notes, Series 2015-1 (the Class A-2 Notes)
-- A (sf) to the Class B Receivable-Backed Notes, Series 2015-1 (the Class B Notes)

On closing, the Trust acquired a portfolio of retail installment sales contracts secured by new and used agricultural and construction equipment (the Portfolio of Assets) originated in Canada. The Class A-1 Notes and the Class A-2 Notes (collectively, the Class A Notes or the Senior Notes) and the Class B Notes (collectively, with the Senior Notes, the Notes) are structured as sequential pass-through securities with principal and interest paid on a monthly basis from collections on the Portfolio of Assets.

The ratings incorporate the following considerations:

(1) Obligor Profile
Consistent with previous transactions, the current transaction benefits from a diverse portfolio of obligors, mainly from the agricultural (AG) sector. CNH Capital’s obligor profile has demonstrated consecutive years of exceptionally strong repayment history from a delinquency and loss perspective. The detailed historical static loss performance on the AG and construction equipment (CE) sectors provides significant data to assess and estimate base case loss assumptions for each sector in the pool.

(2) Collateral Profile
Strong AG collateral values as CNH Industrial N.V. is the second-largest agricultural equipment manufacturer in the world and a leading producer of tractors and combine harvesters, based on units sold. Brand loyalty is strong in the AG and CE industries and provides support to the continued strength in recoveries, evidenced by low net loss rates.

(3) Credit Enhancement Structure
The credit enhancement provides a deleveraging structure (taking into account the cash step-downs) as the sequential notes are repaid. Based on a conservative cumulative loss assumption of 60 basis points, relative to performance since 2009, the Spread Account of 2.15%, subordination to the Senior Notes of 2.10% and an excess interest rate spread of 2.91% at closing provides 4.0 times (x) to 6.0x base case expected loss coverage for the Class A Notes and 2.5x to 3.5x coverage for the Class B Notes.

(4) Seller/Servicer
CNH Capital (an indirect wholly owned subsidiary of CNH Industrial N.V.) has significant experience in the origination and servicing of equipment loans and leases. This experience includes a successful track record in the issuance and management of private and public securitization programs in Canada, including five transactions since 2011, which are performing well within base case expectations.

Stress tests using assumptions including Replacement Servicer Fees, prepayments, and large increases in delinquency and credit losses indicate that credit enhancement available provides sufficient protection to the Notes to warrant the ratings assigned.

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

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

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 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.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.