A pool of fixed-rate loans, a large majority of which finance agricultural and construction equipment, and most of which are new, will provide the collateral for at least $1 billion in asset-backed securities (ABS).
Sold through the John Deere Owner Trust 2024, the notes can be upsized to $1.3 billion, and the deal could price by March 19, according to ratings analysts at Moody's Investors Service. The capital structure is made up of five tranches of class A notes, Moody's said.
All of the notes have a total hard credit enhancement level of 3.5%, and the notes also have an initial cash reserve representing 1.0% of the outstanding note balance, to help ensure their timely repayment, Moody's said. The note also benefit from non-declining overcollateralization of 2.5% of the initial discounted pool balance. Tranches A1, A2A and A2B, A3 and A4 have legal final maturity dates of March 17, 2025, Feb. 16, 2027, Nov. 15, 2028 and Feb. 18, 2031, respectively.
Moody's says it will assign P1 ratings to the A1 notes, and Aaa to all of the tranches throughout the rest of the capital structure. Fitch Ratings also weighed in, and assigns F1+ to the A1 notes, and AAA to the A2A through A4.
The rating agency points to several strengths, including a strong and consistently managed portfolio, where John Deere Capital Corp. (JDCC) originated the loans, and delinquencies and net losses have been low. Also, JDCC has sponsored securities backed by agricultural and construction equipment contracts since 1992.
Some 12,621 contracts are in the collateral pool. A large majority of obligors (75.3%) are in the agricultural industry, while construction accounts for the other 24.7%. In another respect a majority of the loans are on new equipment (56.2%), and used equipment accounts for 43.8%.
Texas, Iowa and Illinois are the top three states in the pool, representing 10.2%, 6.4% and 5.7%, respectively.
