DBRS Finalizes Provisional Ratings on Navitas Equipment Receivables LLC 2016-1, Receivable Backed Notes, Series 2016-1

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following Notes issued by Navitas Equipment Receivables LLC 2016-1 (the Issuer):

-- $60,100,000 Class A-1 Notes, rated R-1 (high) (sf)
-- $109,968,000 Class A-2 Notes, rated AAA (sf)
-- $25,489,000 Class B Notes, rated BBB (sf)

The DBRS ratings are based on DBRS’s review of the following analytical considerations:

-- Subordination, overcollateralization (OC) and cash reserve account create credit enhancement levels that are comparable to other issuers in the sector.
-- Subordination of junior classes, OC and non-declining cash reserve create increasing credit enhancement for the senior classes of the Notes over the life of the transaction.
-- The transaction is supported by the sequential principal payment priority, which does not allow any releases of collections to the Issuer (other than residual proceeds under certain circumstances) until a certain level of credit enhancement is reached and maintained and subject to the net loss performance of the collateral pool.
-- The management team of Navitas Credit Corp. is highly experienced and has a long track record of successful origination and servicing in the small-ticket equipment segment.
-- A majority of the obligors have been in business for more than five years.
-- The collateral pool does not contain any significant concentrations of obligors, vendors or geographies and consists of a diversified mix of the equipment types similar to those customarily included in other small-ticket lease and loan securitizations.
-- While the structure allows for a three-month prefunding period, during which the acquisition by the Issuer of new contracts will be permitted, the proposed concentration limits will mitigate the risk of material migration in the collateral pool’s composition or risk profile.

Credit enhancement for the Notes is primarily provided through OC, subordination and cash reserve account. Initial hard credit enhancement for the Class A-1 and the Class A-2 Notes is 73.19% and 21.85%, respectively, while the initial hard credit enhancement for the Class B Notes is 9.95%. The initial OC is equal to 4.25% of the initial Aggregate Discounted Contract Balance of the collateral pool, plus the amount expected to be conveyed to the collateral pool during the Funding Period. The amount on deposit in the Reserve Account is equal to 1.25% of the initial Aggregate Discounted Contract Balance of the collateral pool on the Closing Date. This amount will be increased during the Funding Period as additional contracts are conveyed to the collateral pool in order to maintain the amount on deposit in the Reserve Account equal to at least 1.25% of the initial Discounted Contract Balances of all contracts transferred to the Issuer. The amounts on deposit in the Reserve Account may be withdrawn, if necessary, to pay the timely interest on any class of the Notes, or to make principal payments on the Notes necessary to maintain the amount of outstanding Notes equal to at least the Aggregate Discounted Contract Balance.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating U.S. Equipment Lease and Loan Securitizations (June 2015), which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Please see the attached appendix for additional information regarding sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.