DBRS Assigns Provisional Ratings to Navistar Financial Dealer Note Master Owner Trust II, Series 2016-1

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes issued by Navistar Financial Dealer Note Master Owner Trust II, Series 2016-1:

-- $211,330,000 Series 2016-1, Class A rated AAA (sf)
-- $13,120,000 Series 2016-1, Class B rated AA (sf)
-- $11,740,000 Series 2016-1, Class C rated A (sf)
-- $13,810,000 Series 2016-1, Class D rated BBB (sf)

The ratings are based on a review by DBRS of the following analytical considerations:

-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement. Credit enhancement is in the form of subordination, overcollateralization and amounts held in the reserve fund. Credit enhancement levels are sufficient to support DBRS projected expected cumulative net loss (CNL) assumptions relating to both dealer concentrations and scenarios involving simultaneous stresses to portfolio yield, charge-offs and payment rates.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. For this transaction, the rating addresses the payment of timely interest on a monthly basis and principal by the legal final maturity date.
-- The transaction parties’ capabilities with regards to originations, underwriting and servicing, and the financial strength of Navistar Financial Corporation (NFC) and its relationship with its parent Navistar, Inc.
-- The credit quality of the collateral and performance of NFC’s wholesale portfolio.
-- The presence of Wells Fargo Bank, N.A. as a “warm” backup servicer for this trust.
-- Soundness of the legal structure and presence of legal opinions address the true sale of the assets to the issuer, the non-consolidation of the special-purpose vehicle with NFC, and that the trust has a valid first-priority security interest in the assets, in addition to the transaction’s consistency with the DBRS’s “Legal Criteria for U.S. Structured Finance” methodology.

The 2016-1 transaction will offer both senior and subordinate rated securities. The receivables securitized in NAVMT II 2016-1 will be secured by the dealer notes. The dealer notes are used to finance new or used medium- or heavy-duty trucks, truck chassis, buses and trailers.

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

The applicable methodology is Rating U.S. Wholesale Securitizations, 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 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.