DBRS Morningstar Upgrades Two Ratings and Confirms Seven 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 annual updates:

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

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

-- 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)
-- Class A-1 Receivable-Backed Notes, Series 2021-1 at AAA (sf) (the Series 2021-1, Class A-1 Notes)
-- Class A-2 Receivable-Backed Notes, Series 2021-1 at AAA (sf) (together with the Series 2021-1, Class A-1 Notes, the Series 2021, Class A Notes)
-- Class A-1 Asset-Backed Notes, Series 2021-2 at AAA (sf) (the Series 2021-2, Class A-1 Notes)
-- Class A-2 Asset-Backed Notes, Series 2021-2 at AAA (sf) (together with the Series 2021-2, Class A-1 Notes, the Series 2021, Class A Notes)

The rating confirmation and upgrades are based on the following factors as of January 2022:

(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 2019-1 Notes has grown to 7.9% of the outstanding balance as of January 2022 compared with 5.2% in January 2021. The Series 2019-1, Class A-2 Notes benefit from the subordination of the Series 2019-1, Class B Notes equal to 11.0% of the current outstanding balance.

(b) The cash spread account for the Series 2021-1 Notes has grown to 3.6% of the outstanding balance since closing. The Series 2021-1, Class A Notes benefit from the subordination of the Series 2021-1, Class B Notes equal to 3.6% of the current outstanding balance.

(c) The cash spread account for the Series 2021-2 Notes has grown to 2.3% of the outstanding balance since closing. The Series 2021-2, Class A Notes benefit from the subordination of the Series 2021-2, Class B Notes equal to 2.3% 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.) 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 (June 7, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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].

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