Moody’s Investors Service and Fitch Ratings have both given top marks to John Deere’s latest securitization of equipment installment sale contracts.
The $870 million deal consists of a $257 million money market class with a preliminary P1 rating from from Moody’s and F1 rating from Fitch. There are also three classes of senior notes rated ‘Aaa’ by Moody’s and ‘AAA’ by Fitch.
Moody’s noted in its presale report that the collateral in the latest deal, JDOT 2013-B, is similar to a transaction John Deere brought to market earlier this year, with approximately 75% of the assets in the deal comprised of receivables secured by agricultural equipment and 25% secured by construction equipment. Historically, receivables secured by agricultural equipment have shown better credit performance than those secured by construction equipment. Transactions John Deer completed prior to 2011 had lower concentrations of receivables (65%) secured by agriculture equipment and a higher concentration (35%) secured by construction equipment.
Fitch takes a slightly different view of the collateral mix. In its presale report, it noted that, while agricultural equipment historical losses have been low, a high concentration in the pool limits diversification and exposes the trust to other factors, such as natural disasters. However, Fitch said that geographic diversity helps to mitigate the high concentration.
Furthermore, Fitch said, the pool consists of 66.7% annual-pay contracts, which historically have experienced a lower level of losses versus other payment types.
Merrill Lynch, Pierce, Fenner & Smith, HSBC Securities, RBC Capital Markets, Barclays Capital and Mitsubishi UFJ Securities are the underwriters.