Fitch Rates John Deere Owner Trust 2018.
--$223,000,000 class A-1 notes 'F1+sf';
--$220,960,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$224,950,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$84,280,000 class A-4 notes 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
Consistent Collateral Concentrations: JDOT 2018 comprises approximately 75% agricultural (AG) equipment and 25% construction (CO) equipment (of the aggregate balance), consistent with the prior transactions dating back to 2011. 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.
Solid Managed Pool and ABS Performance: Net loss levels on the managed pool and the term ABS transactions remain below peak historical levels. While there was slight weakening in recovery rates for both AG and CO in 2015 and 2016, net loss levels continue to track only slightly above loss levels in the strongest performing vintage range, 2010-2014. Furthermore, recent recovery rate performance has shown some improvement.
Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for JDOT 2018 is 3.50%, unchanged from JDOT 2017-B. Under Fitch's 'AAAsf' scenario, CE for the class A notes was able to withstand more than 5.0x the expected net loss rate of 1.00%.
Stable Origination, Underwriting and Servicing: JDCC has demonstrated strong capabilities as originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and its managed portfolio. All securitizations issued and rated by Fitch have performed within initial base case expectations.
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. This in turn could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of JDOT 2018 to increased losses over the life of the transaction. Such analysis found that the notes display some sensitivity to increased defaults and losses. Under Fitch's moderate (1.5x base case loss) scenario the notes would be unlikely to experience any downgrade. However, the notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Deloitte & Touche LLP. The third-party due diligence focused on comparing or recalculating certain information with respect to 120 receivables. Fitch considered this information in its analysis, and the findings did not have an impact on our analysis. 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.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||May 16, 2018|
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