Fitch Rate MMAF Equipment Finance LLC 2016-A

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings to the MMAF Equipment Finance LLC 2016-A notes:

--$144,000,000 class A-1 'F1+sf';

--$190,000,000 class A-2 'AAAsf'; Outlook Stable;

--$176,000,000 class A-3 'AAAsf'; Outlook Stable;

--$185,000,000 class A-4 'AAAsf'; Outlook Stable;

--$91,990,000 class A-5 'AAAsf'; Outlook Stable.

Fitch's stress and rating sensitivity analysis are discussed in the presale report titled, 'MMAF Equipment Finance LLC 2016-A' dated April 26, 2016, and available on Fitch's web site. The presale report details how Fitch addresses the key rating drivers summarized below.

KEY RATING DRIVERS

Stronger Credit Quality: Approximately 90.0% of the pool is publicly rated by a nationally recognized statistical rating organization (NRSRO). The vast majority (85.6%) of the pool is rated investment grade by an NRSRO, which is slightly higher than the level for 2015-A.

Consistent Portfolio Diversification: Obligor, industry, equipment type and geographic concentrations in 2016-A are relatively consistent with historical levels. The top obligor, the U.S. government (U.S. gov.), totals 22.0% of the 2016-A pool, and the top 10 obligors compose 59.6%, compared with 52.0% and 62.4% in 2015-A and 2014-A, respectively.

Strong Performance: MMAF's securitizations have performed well with minimal delinquencies and losses to date. Additionally, MMAF has had almost no turn-ins, and its residual realization rates are consistently over 100%, with all equipment sold to lessees.

Sufficient Enhancement: 2016-A has 9.75% total hard credit enhancement (CE) for the class A notes, 25 bps lower than for 2015-A, and initial excess spread totals approximately 0.80%. CE is sufficient to support the net loss expectation of 9.50%.

Quality Underwriting and Servicing Platform: MMAF does not originate contracts but purchases them from approved syndicators. However, MMAF demonstrates adequate abilities as an underwriter and servicer, as evidenced by historical performance of its securitizations and managed portfolio. Portfolio Financing Services Company (PFSC) is the sub/backup servicer for 2016-A.

Integrity of Legal Structure: The legal structure of the transaction provides that a bankruptcy of MMAF would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults or decreases in recovery rates 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 obligor defaults in the portfolio by applying 'CCC' ratings to the unrated obligors in the portfolio, stressed down from the 'B' rating applied under the base recommended scenario. Additionally, recoveries were stressed by applying a stress of 50% to the base recovery rates. Fitch's analysis found that the transaction displays relatively little sensitivity to increased obligor defaults and decreased recovery rates. In both cases, the notes showed minimal rating sensitivity.

DUE DILIGENCE USAGE

Additionally, Fitch was provided with third-party due diligence information from KPMG LLP. The third-party due diligence focused on comparing or recalculating certain information with respect to 75 receivables. Fitch considered this information in its analysis and the findings did not have an impact on our analysis/conclusions. A copy of the ASB Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of this rating action commentary (RAC).

Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Feb. 4, 2016. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'MMAF Equipment Finance LLC 2016-A- 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.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the above link.}

Additional information is available at www.fitchratings.com.

Applicable Criteria

Criteria for Rating U.S. Equipment Lease and Loan ABS (pub. 03 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874138

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412

Global Rating Criteria for CLOs and Corporate CDOs (pub. 12 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873664

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

MMAF Equipment Finance LLC 2016-A - Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880676

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004340

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1004340&flm_nm=15e_1004340_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004340

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160511006551/en/

Fitch Ratings
Primary Analyst
Thomas Kaiser, CPA, CFA
Associate Director
+1-312-368-3338
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Andrew Tinari
Associate Director
+1-312-368-3127
or
Committee Chairperson
Du Trieu
Senior Director
+1-312-368-2091
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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