A collateral pool heavily weighted toward agricultural equipment will secure the CNH Equipment 2022-B, a transaction that is set to raise $835.6 million in asset-backed securities.
Agricultural equipment—an asset class with low losses, historically—accounts for 87% of the pool, with construction accounting for the other 13%, according to Fitch Ratings. Notwithstanding agricultural equipment's track record, the high concentration limits diversification in the deal, Fitch said.
BofA Securities is the lead underwriter on the deal, with New Holland Credit Co. acting as servicer. The transaction will repay noteholders on a sequential basis. The class A notes, which range from A-1 through A-4, will receive 100% of the principal amount until they are fully repaid.
The class B notes will begin receiving principal after the four class A notes have received full payments. Should a default and acceleration of the notes occur, however, principal payments will be paid first to class A-1 notes, and then on a pro rata basis throughout the rest of the A notes.
Fitch noted that 15,065 contracts underpin the collateral pool of new and used equipment.
On a weighted average (WA) basis, the contracts have an APR of 3.34%, and a remaining term of 55.7 months. The contracts have a seasoning of six months, the rating agency said.
Although Fitch expressed concern about the heavy representation of agricultural equipment, CNH Equipment is diversified in several other ways. The largest obligor, for instance, accounts for 0.84% of the pool, and the top obligor, 6.18%. Geographically speaking, Illinois accounts for 7.66% of the deal. The other four states—Texas, Indiana, Minnesota and South Dakota—account for 6.9%, 5.1%, 5.0% and 4.5%, respectively.
Fitch says the notes have sufficient credit enhancement, with a level of 4.5% on classes A-1 through A-4, and 2.25% on the class B notes. Ratings range from F1 on the A-1 notes; 'AAA' on the A-2 through A-4 notes; and 'A+' on the class B notes.
