DBRS Confirms the Outstanding Ratings Issued by Navistar Financial Dealer Note Master Owner Trust II

DBRS, Inc. (DBRS) has today confirmed the outstanding ratings on the following Notes issued by Navistar Financial Dealer Note Master Owner Trust II (the Issuer):

-- Series 2012-VFN Notes at AAA (sf)

-- Series 2014-1 Class A Notes at AAA (sf)
-- Series 2014-1 Class B Notes at AA (sf)
-- Series 2014-1 Class C Notes at A (sf)
-- Series 2014-1 Class D Notes at BBB (sf)

-- Series 2015-1 Class A Notes at AAA (sf)
-- Series 2015-1 Class B Notes at AA (sf)
-- Series 2015-1 Class C Notes at A (sf)
-- Series 2015-1 Class D Notes at BBB (sf)

As these series were issued as part of a master trust, DBRS has confirmed the outstanding 2012-VFN, 2014-1 and 2015-1 series based on the following analytical considerations:

-- The credit quality of the collateral and performance of NFC’s wholesale portfolio.

-- 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) assumption relating to cash flow modeling scenarios involving simultaneous stresses applied to portfolio yield, charge-offs and payment rates.
-- The ability of the transactions to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. For these transactions, the ratings address the payment of timely interest on a monthly basis and principal by the legal final maturity date.

-- DBRS typically reviews multiple aspects of a wholesale transaction to assess creditworthiness, including analysis of the dealer concentration scenario and the cash flow modelling results. In the analysis to finalize the Series 2016-1 provisional ratings, DBRS performed additional analysis and updated the recovery assumption in the dealer concentration scenario. The recovery credit was updated to 48% from 40%.

-- 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 presence of Wells Fargo Bank, N.A. as a “warm” backup servicer for this trust.

-- Consistency 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 with the DBRS’s “Legal Criteria for U.S. Structured Finance” methodology.

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.