Two equipment-lease securitizations were launched Thursday: a $850 million deal from CNH Industrial and a $454 million deal from GreatAmerica Financial Services Corp.
Both are being rated by Fitch Ratings.
CNH Equipment Trust 2016-A is backed by a series of 14,901 retail installment loan sales contracts originated by CNH Industrial Capital America LLLC totaling $902.8 million, with the vast majority in the agricultural sector. The contracts have an average balance of $60,588, with an average APR of 3.54 on just over 60-month terms.
Citibank is the underwriter.
The notes in the CNH proposal are split between five Class A tranches and a Class B tranche. The Class A notes include a $323 million slice due 2019 that is to be divided between Class A-2a and Class A-2b tranches, a Class-A-3 $265 million notes issue due 2021, a $69.99 million portion due 2021 and a $174.9 million, one-year money market tranche of $174.9 million. The Class A term notes carry an expected ‘AAA’ rating from Fitch, while the one-year issue received an ‘F1’ structured rating from Fitch.
A $19.11 billion Class B notes issue due 2023 was rated ‘A.’
The collateral pool has a high concentration in agricultural products, a standard for CNH ABS transactions since 2009. Some pools have included between 91% and 95% ag equipment. The new 2016 securitization pool also has a larger-than-usual mix of used-equipment leases, comprising 55% of the portfolio contract value. For agricultural equipment alone, the mix of used equipment contracts rose to 51.8% from the most recent 40.24% level of used equipment in the third CNH transaction last year (CNH Equipment Trust 2015-C).
Fitch noted the concentration is mitigated by the “historically low” losses in agricultural deals, as well as CNH's diversity in both geography and product mix in the agricultural industry. But Fitch warns that the heavy mix of agricultural equipment still exposes the trust to potential risk with continued low economic growth, commodity prices that hurt farm income and natural disasters such as droughts or floods.
The credit enhancement on the Class A notes remains at 4.5%, the same as in recent securitizations, and the Class B stays at 2.25%; the transaction is also aided by 2.36% in excess spread.
GreatAmerica Leasing Receivables LLC 2016-1 will have three classes of notes. The Class A notes are comprised of a short-term $105.82 million due 2017; a $111.07 million Class A-2 series due May 2018; a $115.79 million Class A-3 due June 2019; and a Class A-4 due 2022 for $90.14 million.
The capital structure is rounded out by $18.11 million in Class B notes due 2022 and $13.11 million of Class C notes due 2023.
Fitch Ratings and Standard & Poor's have assigned expected ‘AAA’ ratings to the three Class A note tranches, as well as ‘F1’/'A-1' ratings for the short-term A-1 class that matures in one year; ‘AA’ ratings for the Class B notes and an ‘A’ for the Class C notes.
Wells Fargo is the underwriter.
GreatAmerica’s offering is backed by 33,500 small-ticket commercial equipment leases and loans – primarily office copiers and printers – originated by GreatAmerica Financial Services Corp. The contracts within the pool average original terms of 53.5 months, with an average principal balance of $14,229 for a pool balance of $476.7 million.
As with GreatAmerica’s 14 prior securitizations, a majority are lease contracts (68% of the pool) vs. finance options, and are concentrated in office imaging equipment (67%). Other equipment contracts in the mix include telephone (9.32%), automotive repair (4.61%) and computer hardware. (4.98%).
The obligors in the pool range from services industry firms (48.32%) to retail (11.17%) and finance/insurance/real estate (8.8%).
The credit enhancements for the series of notes is 12.3% for the Class A notes; 8.5% for Class B and 5.75% for Class C – each level is down from previous GreatAmerica collateralizations, including the 12.9%/9.16%/6.25% initial hard credit enhancements for GreatAmerica’s 2015-1 collateralization.
Overcollaterization level is set at 4.75%.