Link to Fitch Ratings' Report: Kubota Credit Owner Trust 2015-1 (US ABS)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=854508
Fitch Ratings assigns the following ratings and Rating Outlooks to Kubota Credit Owner Trust 2015-1:
--$109,000,000 class A-1 notes 'F1+sf';
--$178,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$150,000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$63,000,000 class A-4 notes 'AAAsf'; Outlook Stable.
Fitch's stress and rating sensitivity analysis are discussed in Fitch's presale report, 'Kubota Credit Owner Trust 2015-1', published on Jan. 15, 2015 and available at 'www.fitchratings.com' or by clicking on the above link.
KEY RATING DRIVERS
Quality of Receivables: For the 78% of the pool with FICO scores, the obligors have strong credit quality, as evidenced by the WA FICO of 740 for the 2015-1 pool. Additionally, the majority of the 2015-1 pool (approximately 83%) consists of new AG equipment, which is the strongest performing collateral type. The 2015-1 pool is also diversified in terms of geographic concentrations and has limited exposure to obligor concentrations.
Strong Managed Portfolio: KCC's managed portfolio has experienced consistent and low levels of delinquencies and net losses dating back to 2008. As static pool data from a recessionary period were not available, Fitch supplemented the KCC data with proxy data from prime auto loan issuers with similar FICO composition on the consumer portion (78%) of the pool and John Deere and CNH Capital proxy data for the commercial portion (22%) of KCOT 2015-1 to derive an expected base case CNL.
Credit Enhancement: Initial hard credit enhancement (CE) for KCOT 2015-1 is 4.00% (unchanged from 2014-1) for the class A notes. The transaction also benefits from expected excess spread of 2.47% per annum (p.a.). Based on Fitch's stressed cash flow scenarios, the structure can support 7.16% in net loss coverage under a 1.30% base case proxy. This results in loss multiples in excess of 5.0x, consistent with a 'AAAsf' rating for the class A notes.
Quality Origination, Underwriting, and Servicing Platform: KCC has demonstrated adequate abilities as originator, underwriter, and servicer, as evidenced by historical delinquency and net loss performance of 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 assigned to KCOT 2015-1 to increased CNL over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and CNL, showing a potential downgrade of one category under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to three rating categories, although still remain investment grade, under Fitch's severe (2.5x base case loss) scenario.
Key rating drivers and rating sensitivities are further detailed in the accompanying pre-sale report.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Kubota Credit Owner Trust 2015-1 - Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in Fitch's Oct. 31, 2014 special report, 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Equipment Lease and Loan ABS' (December 2014);
--'Rating Criteria for U.S. Auto Loan ABS' (April 2014);
--'Global Structured Finance Rating Criteria' (August 2014);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (October 2014);
--'Kubota Credit Owner Trust 2015-1' (January 2015);
--'Kubota Credit Owner Trust 2015-1 - Appendix' (January 2015).
Applicable Criteria and Related Research:
Criteria for Rating U.S. Equipment Lease and Loan ABS
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=830328
Rating Criteria for U.S. Auto Loan ABS
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738718
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=799248
Kubota Credit Owner Trust 2015-1 - Appendix
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=855368
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978738
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