John Deere Capital Corp. is sponsoring another securitization of retail installment sale and loan contracts secured by new and used agricultural and construction equipment, this time in raising $1.3 billion from investors.
Consistency is the hallmark of the John Deere Owner Trust, 2023-B, as it resembles previous pools going back to 2011, according Fitch Ratings analysts writing in a pre-sale report. That comes with advantages and disadvantages. The program has experienced low historic losses and is highly diversified geographically, according to Fitch analysts. Yet high asset concentration in the pool does limit diversification to some extent, the rating agency said.
Bank of America Securities is lead underwriter on the deal, according to the deal's Securities and Exchange Commission filing. A group of other banks are also on the deal as managers, including Barclays, Citigroup, Mitsubishi UFG Securities and Credit Agricole Securities, according to Asset Securitization Report's deal database.
The deal is slated to close at the end of June, issuing four classes of notes.
Similar to previous deals, John Deere has initial hard credit enhancement of 3.50%, Fitch said, adding that initial spread is expected to be 2.00% per annum.
Consistency plays in John Deere's favor in terms of credit ratings, according to Fitch. Various John Deere entities are participating as originator, underwriter and servicer, where the company has demonstrated strong capabilities. The split among equipment type and status are also similar to previous deals, as agricultural equipment accounts for 75.52%, leaving construction 24.47% of the pool. New equipment accounts for more than half of the pool, 53.3%, leaving used with 46.6%.
Some 19,295 contracts secure the pool, which have an average balance of $76,908 and a weighted average (WA) annual percentage rate of 3.93%.
Fitch says it plans to assign ratings of 'F1+' to the class A-1 notes; and 'AAA' to the A-2 through A-4 classes of notes. The notes have maturities that range from July 15, 2024 through May 15, 2030.
