Fitch Rates CNH Equipment Trust 2015-C
--\\$160,000,000 class A-1 'F1+sf';
--\\$129,000,000 class A-2a 'AAAsf'; Outlook Stable;
--\\$129,000,000 class A-2b 'AAAsf'; Outlook Stable;
--\\$238,000,000 class A-3 'AAAsf'; Outlook Stable;
--\\$77,120,000 class A-4 'AAAsf'; Outlook Stable;
--\\$16,880,000 class B 'A+sf'; Outlook Stable.
KEY RATING DRIVERS
High Agricultural Equipment (AG) Concentration: The 2015-C collateral pool consists of 87% AG and 13% construction equipment (CO). While the AG concentration is the lowest since 2008, the concentration remains significantly higher than pre-2009 transactions. While AG equipment historical losses have been low, the high concentration in the pool limits diversification. However, geographic diversity, diversification within the AG sector, and equipment versatility help mitigate the high concentration.
Consistent Collateral Concentrations: The pool contains 56% new equipment, the highest since 2009. Additionally, the pool contains 64% in annual pay contracts, slightly lower than recent transactions driven by the decrease in AG.
Sufficient Credit Enhancement: Credit enhancement (CE) for the 2015-C transaction is consistent with the prior 11 transactions. Class A CE remains at 4.50%, and class B CE remains at 2.25%. The available CE is sufficient to support Fitch's 1.15% cumulative net loss (CNL) proxy.
Quality Origination, Underwriting and Servicing: CNH Industrial Capital has demonstrated adequate abilities as originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the managed portfolio.
Integrity of Legal Structure: The legal structure of the transaction should provide that a bankruptcy of the trust would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings to increased losses over the life of the transaction. Fitch's analysis found that the notes display limited sensitivity to increased defaults and losses, showing limited impact on the rating of the notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.
DUE DILIGENCE USAGE
Additionally, Fitch was provided with third-party due diligence information from Ernst & Young LLP. The third-party due diligence focused on comparing or recalculating certain information with respect to 184 receivables. Fitch considered this information in its analysis and the findings did not have an impact on our analysis/conclusions. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary (RAC).
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Aug. 6, 2015. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'CNH Equipment Trust 2015-C - Appendix'. These R&Ws are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated June 12, 2015.