DBRS Morningstar Upgrades Three Ratings and Confirms Five Ratings of CNH Capital Canada Receivables Trust

DBRS Limited (DBRS Morningstar) upgraded its ratings of the following series of notes issued by CNH Capital Canada Receivables Trust as part of DBRS Morningstar’s continued effort to provide market participants with updates on an annual basis:

-- Class B Receivable-Backed Notes, Series 2017-2 (Series 2017-2, Class B Notes) to AAA (sf) from AA (sf)
-- Class B Receivable-Backed Notes, Series 2018-2 (Series 2018-2, Class B Notes) to AA (high) (sf) from AA (sf)
-- Class B Receivable-Backed Notes, Series 2020-1 (Series 2020-1, Class B Notes) to A (sf) from BBB (sf)

DBRS Morningstar also confirmed the ratings of the following series of notes (collectively with the Series 2017-2, Class B Notes; Series 2018-2, Class B Notes; and the Series 2020-1, Class B Notes, the Notes):

-- Class A Receivable-Backed Notes, Series 2017-2 at AAA (sf)
-- Class A-2 Receivable-Backed Notes, Series 2018-1 at AAA (sf)
-- Class A Receivable-Backed Notes, Series 2018-2 at AAA (sf)
-- Class A-2 Receivable-Backed Notes, Series 2019-1 at AAA (sf)
-- Class A Receivable-Backed Notes, Series 2020-1 at AAA (sf)

DBRS Morningstar initially published its outlook on the Coronavirus Disease (COVID-19) pandemic’s impact on key economic indicators for the 2020–22 time frame in April 2020. DBRS Morningstar last updated the macroeconomic scenarios on January 28, 2021, in its “Global Macroeconomic Scenarios: January 2021 Update” at https://www.dbrsmorningstar.com/research/372843. For the rated Notes, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis. The rating confirmation and upgrades are based on the following factors as of January 2021:

(1) High levels of credit enhancement that have built up since closing are available to protect all of the Notes. Credit protection to the Notes is provided by a cash spread account and subordination. Subject to the performance of the assets, the cash spread account is permitted to decrease up to four times on a predetermined schedule as the transaction amortizes. The step-downs are subject to both delinquency and cumulative loss tests.

(a) The cash spread account for the Series 2018-1 Notes has grown to 8.2% of the outstanding balance as of January 2021 compared with 5.5% as of January 2020. The Series 2018-1, Class A Notes benefit from the subordination of the Series 2018-1, Class B Notes equal to 11.5% of the current outstanding balance.

(b) The cash spread account for the Series 2019-1 Notes has grown to 5.2% of the outstanding balance as of January 2021 compared with 3.0% in January 2020. The Series 2019-1, Class A Notes benefit from the subordination of the Series 2019-1, Class B Notes equal to 5.5% of the current outstanding balance.

(2) The Notes are also protected by excess spread, which is available to cover monthly credit losses and any arising replacement servicer costs.

(3) Credit performance of the collateral for the Notes remains strong. The cumulative loss rate for all series is performing within DBRS Morningstar’s expectations.

(4) Strong experience of CNH Industrial Capital Canada Ltd. (a wholly owned subsidiary of CNH Industrial N.V., which was confirmed at BBB (low) with a Stable trend by DBRS Morningstar on June 9, 2020) in 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.

DBRS Morningstar monitors the performance of the transaction to identify any deviation from DBRS Morningstar’s expectations at issuance and to ensure the ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of the equipment finance portfolio and the Notes are available and updated each month in the Monthly Canadian ABS Report.

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 Canadian dollars unless otherwise noted.

The principal methodology is the Master Canadian Structured Finance Surveillance Methodology (August 31, 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 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 under Related Documents or by contacting us at [email protected].

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.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577