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Global Credit Research - 11 Apr 2011
Approximately $1.1 Billion of asset-backed securities rated.
New York, April 11, 2011 -- Moody's Investors Service has assigned a provisional rating of (P)P-1
(sf) to the Class A1 Notes, and a provisional rating of (P)Aaa (sf)
to each of the Class A2, Class A3 and Class A4 Notes, to be
issued by John Deere Owner Trust 2011 (JDOT 2011), a subsidiary
of John Deere Capital Corporation (JDCC, A2/P-1).
The Notes will be collateralized by agricultural and construction equipment
installment contracts and loans originated by JDCC and subsidiaries.
The complete rating actions are as follows:
Issuer: John Deere Owner Trust 2011
$334,000,000 Class A-1, rated (P)P-1
$333,000,000 Class A-2, rated (P)Aaa (sf)
$340,000,000 Class A-3, rated (P)Aaa (sf)
$98,528,000 Class A-4, (P)Aaa (sf)
The ratings are based on the collateral, the structure of the transaction,
and the experience and expertise of John Deere Capital Corporation (JDCC)
as the servicer. JDCC is the captive finance arm of Deere &
Co. (A2/P-1), the world's largest farm equipment manufacturer
and a leading manufacturer in the construction equipment sector.
For JDOT 2011, Moody's median cumulative net loss expectation is
1.25% and Aaa Volatility Proxy is 9.0%.
Moody's net loss expectation and Aaa Volatility Proxy are based on an
analysis of the credit quality of the underlying collateral, historical
performance trends, the ability of JDCC to perform the servicing
functions, and current expectations for future economic conditions.
The 1.25% expected loss for the 2011 securitized pool is
lower than the expected loss of 1.75% on the JDOT 2010 pool,
the most recent transaction of JDCC. This decrease is largely driven
by a shift in the composition of the current pool in favor of the better-performing
agricultural equipment collateral (approximately 75% of the JDOT
2011 pool, as compared to 65% in the JDOT 2010 pool),
as well as the expectation of continued benign performance trends in both
the agricultural and construction equipment segments of the pool.
Data provided by JDCC indicated marked increases in delinquencies,
repossessions and losses for its construction and forestry portfolio,
the majority of which is construction loans, during 2009 and 2010.
However, that trend has since reversed, as losses dropped
from 3.61% in 2009 to 1.62% in 2010.
The performance of the agricultural and turf portfolio, the majority
of which is agricultural equipment loans, has remained quite good,
with losses of 0.04% and 0.03% 2009 and 2010,
The principal methodology used in rating the transaction was "Moody's
Approach to Rating Securities Backed By Equipment Leases and Loans" published
April 2, 2007.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Agricultural and
Construction Equipment Loan ABS sector. This reflects a better
than average or lower than average volatility with regards to the critical
assumptions used in the rating process. This also reflects excellent
governance as well as better than average disclosure of securitization
collateral and ongoing performance. The quality of governance of
the transaction is better than for the sector, largely as a result
of the relatively strong financial stability of the servicer, which
is rated A2/P-1, Outlook Stable. Other components
of the V Score are in line with the sector score. Moody's V Scores
provide a relative assessment of the quality of available credit information
and the potential variability around the various inputs to a rating determination.
The V Score ranks transactions by the potential for significant rating
changes owing to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling and the transaction governance that underlie
the ratings. V Scores apply to the entire transaction (rather than
Moody's Parameter Sensitivities: If the expected loss used in determining
the initial rating were changed from 1.25% to 2.75%,
4.25% or 5.75%, the initial model-indicated
rating for the transaction would be Aa2, A2, or Baa2,
respectively. Parameter Sensitivities are not intended to measure
how the rating of the security might migrate over time; rather they
are designed to provide a quantitative calculation of how the initial
rating might change if key input parameters used in the initial rating
process differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each scenario
from a quantitative/model-indicated standpoint. Qualitative
factors are also taken into consideration in the ratings process,
so the actual ratings that would be assigned in each case could vary from
the information presented in the Parameter Sensitivity analysis.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction.
Additional research including a pre-sale report for this transaction
is available at www.moodys.com. The special reports,
"Updated Report on V Scores and Parameter Sensitivities for Structured
Finance Securities" and "V Scores and Parameter Sensitivities in the U.S.
Vehicle ABS Sector" are also available on moodys.com. In
addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
Information sources used to prepare the credit ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
However, the credit rating action was based on limited historical
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Gregory J. Gemson
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns highest provisional ratings to John Deere Owner Trust 2011 equipment ABS notes
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