The John Deere Owner Trust is preparing to issue $1.4 billion in asset-backed bonds, which can be upsized to $1.5 billion, which can be secured by a pool of lease payments on equipment, mostly agriculture and construction.
The series 2024B transaction will issue five tranches of class A notes, according to analysts at Moody's Ratings. The essential details on the original pool size and the upsized deal are the same, according to the capital structure.
JDOT, 2024B's overall credit picture looks strong from a number of perspectives, including overall low delinquency and loss rates, which are in line with historical performance. John Deere Capital is also an experienced servicer, including through past recessionary environments.
All the notes benefit from total hard credit enhancements built into the structure, Moody's said. It represents 3.5% of the pool balance, which includes an initial reserve of 1.0%. and non-declining 2.5% in overcollateralization, the rating agency said. The servicing fee will be subordinated to payments on the notes, providing even more cash flow support to noteholders—at least if JDCC is the servicer. The notes could also benefit from 2.0% in excess spread annually.
Agricultural equipment accounts for a large majority of the collateral pool (75.3%), while construction (24.7%) accounts for the rest. Also, new equipment accounts for most of the leases (55.9%) and used accounts for the rest, at 44.19%.
In other ways the pool appears to be well diversified, with the top obligor representing 0.4% of the poo, while the top five obligors represent 1.1%, the rating agency said.
The 17,196 contracts in the pool have an average balance of $88,487, Moody's said. On a weighted average (WA) basis, the pool contracts have an original term of 55.9 months, remaining term of 45.5 months, and an annual percentage rate of 4.8%. Also on a WA basis, they have a FICO score of 756.
Moody's assigns P1 to the A1 notes and Aaa on the rest of the notes in the deal. The tranches have legal final maturities of June 16, 2025 on the A1 notes; May 17, 2027 on the A2A and A2B notes; March 15, 2029 on the A3 notes; and May 15, 2031 on the A4 notes.
