A diverse mix of well-performing assets in its collateral pool is helping CCG Receivables Trust 2019-2 secure a strong credit profile, as it brings $317.2 million in asset-backed securities to market.
The trust will issue securities backed by contracts from Commercial Credit Group Inc.’s four segments of the equipment leasing business, such as transportation, construction, waste equipment and machine tools, Fitch Ratings noted in a presale report.
It is also a collateral pool with low concentrations of obligors, so Fitch took the stress loss approach to drive its rating assessment.
At the time the deal closes, the top 20 obligors represent 6.8% of the 2019-2 pool; the top 14 obligors represent 5.10% of the pool; and 11 obligors represent 4.29% of the pool. Fitch says it expects the percentages to fluctuate slightly during the transaction. By month 36, the top 20, 14 and 11 obligors will represent 10.06%, 8.03% and 6.785.
Fitch analyzed the pool’s growth in credit enhancement and its relationship to the obligor concentrations, while assuming normal amortization. This analysis illustrated a more rapid growth of credit enhancement, relative to expected top obligor exposures over the duration of the deal.
CCG’s managed portfolio and securitizations have experienced low net losses, largely due to strong recovery performances, said FitchRatings. The agency laid out several reasons driving those strong performances. Cross-collateralization is one factor. Also, CCG deals have historically created cross-default provisions by adding additional pieces of collateral when loans have been made. The trusts have also made use of cross personal and corporate guarantees, and used conservative valuation practices with a strong emphasis on shorter term contracts.
A relatively new segment was added to the pool, machine tools. True enough, machine tools first appeared in the CCG Receivables Trust 2018-1, following the Commercial Credit Group’s acquisition of Manufacturers Capital in February 2017. The asset has performed well, with no delinquencies or losses recorded through fiscal year end 2018. Also, Fitch aggregated the data – which was more detailed than information generally consistent with information provided in offering documents – into quarterly groups to derive better consistency from the data.
Fitch also credited Commercial Credit Group with a good ability to originate and underwrite and service loans.
With those factors in place, Fitch assigned ‘F1+’ to the class; ‘AAA’ to the A2 class; ‘A’ to class B; and ‘BBB’ to class C.
