DBRS Morningstar Finalizes Its Provisional Ratings on CCG Receivables Trust 2021-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes (the Notes) issued by CCG Receivables Trust 2021-1:

-- $74,700,000 Class A-1 Notes at R-1 (high) (sf)
-- $221,180,000 Class A-2 Notes at AAA (sf)
-- $16,811,000 Class B Notes at AA (sf)
-- $15,130,000 Class C Notes at A (sf)

This issuance represents the 13th term asset-backed securitization sponsored by Commercial Credit Group Inc. (CCG) and the 10th rated by DBRS Morningstar, which is secured by the larger small-ticket equipment loan and lease contracts, a security interest in the related equipment and related accounts, insurance proceeds, and other related assets. The Notes were issued under Rule 144A.

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

-- The transaction analysis considered DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: January 2021 Update,” published on January 28, 2021. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on January 28, 2021, and are reflected in DBRS Morningstar’s rating analysis. The analytical considerations incorporate the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.

-- The coronavirus pandemic, which has negatively affected the U.S. and global economies, occurred during a large part of 2020 and is still continuing. DBRS Morningstar’s baseline cumulative net loss (CNL) assumption considered potential impact from the coronavirus pandemic on performance of the collateral securing the Notes.

-- The DBRS Morningstar expected loss assumption of 2.50% took into account the distribution of collateral among four customer industry segments. DBRS Morningstar developed the expected loss assumption for the transportation, construction, and waste business segments based on the segment-specific historical static pool gross default and net loss performance from F2005 through F2020 (as applicable). The expected loss assumption for the machine tool segment reflects CCG management’s prior track record and the performance of the segment to date. In addition, DBRS Morningstar's expected CNL included an adjustment (an expected increase in losses) to account for the impact of the coronavirus pandemic. While uncertainty remains with respect to the intensity and duration of the shock, the DBRS Morningstar-projected CNL included an assessment of the expected impact on performance of collateral for the Series 2021-1 Notes. The assumption also took into account the continuing roll-out of the vaccination program in the United States, the recently enacted second legislative package aimed at supporting small businesses across the country, and our expectation with respect to the remaining time horizon until sustained economic recovery takes place.

-- The sequential amortization of the Notes, subordination, the nondeclining replenishable reserve account, and the overcollateralization floor are expected to create credit enhancement for the Notes that increases over time.

-- The historical performance of the assets originated by CCG with respect to recoveries and net losses has been consistent.

-- The expected collateral pool is granular. The collateral composition is similar to that included in CCG’s previous term securitizations, all of which have performed well within DBRS Morningstar’s expectations.

-- CCG’s management team has considerable experience and expertise in the equipment leasing industry and continues to maintain a strong competitive position by focusing on financing essential income-producing commercial equipment to small and medium-size businesses.

-- The presence of Vervent Inc., an experienced servicer of equipment-backed collateral, as the Backup Servicer for this transaction.

-- A satisfactory review of the legal structure and presence of legal opinions that address true sale and nonconsolidation of the assets, which are held by the special-purpose vehicle; a valid first-priority security interest of the Indenture Trustee, U.S. Bank National Association (rated AA (high) with a Negative trend by DBRS Morningstar) in the assets; and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating U.S. Equipment Lease and Loan Securitizations (July 7, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:
https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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