The John Deere Owner Trust is returning with a billion-dollar asset-backed securities deal, which will sell notes to investors secured by a pool of fixed-rate, retail installment loans contracts on agricultural and construction equipment.
John Deere Owner Trust, 2022-C, references two potential pools that could be securitized—either a $1.15 billion pool, or another amounting to $1.45 billion, according to Fitch Ratings. Depending on which one the sponsor selects for securitization, the class A notes could amount to $1 billion, and $1.27 billion for each collateral pool.
Agricultural equipment accounts for 75% of the pool, while construction equipment accounts for the remaining 25%, according to the rating agency.
Citigroup Global Markets is lead underwriter on the deal, which will issue the notes through four classes of A notes, according to Fitch. The JDOT 2022-C notes will benefit from initial hard credit enhancement of 3.50%, the rating agency said. A 2.50% subordinated certificate and that will build as a percentage of the outstanding collateral balance. The deal also includes a 1.00% non-declining reserve account.
Similar to previous transactions, the deal will incorporate a collateral discounting feature that provides additional levels of excess spread. The discount rate utilized is 8.40%, up from 7.25% for the previous deal, JDOT 2022-B.
The deal structure also includes an 8.40% collateral discount rate, while duration-weighted bond coupons will be about 2.02% per annum. The weighted bond coupon is down from 2.55% in the previous deal.
JDOT is pricing its deal in a widening spread environment, even for highly rated, fixed-rate assets. Spreads on class A-4 notes, priced on swaps, had moved from 48 basis points in the JDOT 2022-A to 80m basis points over the I-Curve on a similar class of notes.
As for the underlying assets, some 17,683 loans underpin the collateral pool, which has an average balance of $65,062. On a weighted average (WA) basis, the assets have an original term of 56.5 months and a remaining term of 44.2 months, with an APR of 2.65%.
The pool is geographically diverse, with Texas accounting for the largest percentage of assets, 12.37%. After that the states with the largest concentration of obligors are Iowa, Illinois, Missouri and Nebraska 6.73%, 6.22%, 5.27% and 5.22%, respectively.
Fitch expects to assign ratings of 'F1+' to the $245.1 million, A-1 notes; and 'AAA' to the A-2 through A-4 notes. The notes have legal final maturities of October 16, 2023 through September 17, 2029, according to the rating agency.
