Kubota Credit Owner Trust, 2022-2, is preparing to come to market with $648.4 million in asset-backed notes secured by retail installment loans on new equipment.
Agricultural, construction and turf equipment account for pool concentrations of 50.5%, 39.6% and 9.7%, respectively. Fitch Ratings, which expects to assign ratings to the notes, says the pool composition is general consistent with the platform’s history, but the 2022-2 deal has the lowest agricultural concentration on the platform to date.
The concentration will limit diversification, even though historic losses in this asset class have been low, the rating agency said. Fitch said that beginning with the 2022-1 transaction, it had observed a shift toward greater concentrations of construction and turf equipment.
Kubota Credit Owner Trust, 2022-2, is extending the trend of lower credit enhancement that caught on in 2022-1, and 2021-2 transactions, but which were lower than deals issued since 2020. Hard credit enhancement for the class A notes totals 4.15% for the deal, consistent with 2022-1 and 2021-2, which was slightly lower, at around 4.0%, Fitch said.
Mitsubishi UFG Securities America, is the lead underwriter on the deal, which Kubota Credit will sponsor and service.
About 30,042 contracts that pay on a monthly basis are in the collateral pool, with contract balances averaging about $26,212. On a weighted average (WA) basis, the contracts have an annual percentage rate of 0.15%, a FICO score of 736, and an original term of 58.6%, according to Fitch.
The program has a very low track record of delinquencies, repossessions and net losses, which peaked in 2009 at 1.26%, 1.15% and 0.70%, respectively, because of the week economic environment at the time. As of March 31, delinquencies, repossessions and net losses stood at 0.59%, 0.08% and 0.10%, respectively.
Fitch expects to assign ratings of ‘F1+’ to the $132 million, A-1 notes, and ‘AAA’ to the three other classes of notes. The notes also have staggered legal final maturity dates, with A-1, A-2, A-3 and A-4 maturing in July 2023, June 2025, December 2026 and June 2028, respectively.
