Fitch Rates CNH Equipment Trust 2016-A

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings to the CNH Equipment Trust 2016-A notes:

--$174,900,000 class A-1 'F1+sf';

--$161,500,000 class A-2a 'AAAsf'; Outlook Stable;

--$161,500,000 class A-2b 'AAAsf'; Outlook Stable;

--$265,000,000 class A-3 'AAAsf'; Outlook Stable;

--$67,990,000 class A-4 'AAAsf'; Outlook Stable;

--$19,110,000 class B 'A+sf'; Outlook Stable

Fitch's stress and rating sensitivity analysis are discussed in the presale report, 'CNH Equipment Trust 2016-A', dated Feb. 4, 2016, which is available on Fitch's web site. The presale report details how Fitch addresses the key rating drivers summarized below.

KEY RATING DRIVERS

High AG Concentration: The 2016-A collateral pool consists of 88% Agricultural and 12% Construction equipment. While the concentrations are consistent with CNH Industrial Capital securitizations dating back to 2009, the AG concentrations in all these transactions are significantly higher relative to CNH Industrial Capital transactions issued prior to 2009.

Consistent Collateral Concentrations: The pool contains 55% used equipment, the highest since 2011-A. While AG concentrations remain high at 88%, historical AG losses have been low. Additionally, geographic diversity, diversification within the AG sector, and equipment versatility help mitigate the high concentration.

Sufficient Credit Enhancement: Credit enhancement (CE) for the 2016-A transaction is consistent with the prior transactions. Class A CE remains at 4.50%, and class B CE remains at 2.25%. The transaction also benefits from 2.67% in excess spread. 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.

RATING SENSITIVITIES

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

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 this rating action commentary (RAC).

Key Rating Drivers and Rating Sensitivities are further described in the presale report dated February 4, 2016. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'CNH Equipment Trust 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

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

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

Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 22 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=840189

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

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

Related Research

CNH Equipment Trust 2016-A - Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=877531

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999587

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=999587&flm_nm=15e_999587_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999587

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/20160217006433/en/

Fitch Ratings
Primary Analyst
Thomas Kaiser, CPA, CFA
Associate Director
+1-312-368-3338
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Du Trieu
Senior Director
+1-312-368-2091
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-0214
or
Media Relations:
Hannah James, +1 646-582-4947
[email protected]

Source: Fitch Ratings

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