New York, November 05, 2020 -- Moody's Investors Service has upgraded one class of notes in CNH Equipment
Trust 2019-C (CNH 2019-C). The transaction is a securitization
of retail installment contracts backed by agricultural and construction
equipment and is sponsored by CNH Industrial Capital America LLC (CNH
Capital America), an indirect, wholly owned subsidiary of
CNH Industrial N.V. (Baa3 stable).
The complete rating action is as follows:
Issuer: CNH Equipment Trust 2019-C
Class B Notes, Upgraded to Aa1 (sf); previously on Oct 23,
2019 Definitive Rating Assigned Aa3 (sf)
RATING RATIONALE
The rating action is primarily based on the continuous buildup of credit
enhancement due to the sequential pay structure, offset by the subordination
nature of the note. Credit enhancement includes overcollateralization
and a non-declining reserve account.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of corporate assets from
the current weak US economic activity and a gradual recovery for the coming
months. Although an economic recovery is underway, it is
tenuous and its continuation will be closely tied to containment of the
virus. As a result, the degree of uncertainty around our
forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was "Moody's
Approach to Rating ABS Backed by Equipment Leases and Loans" published
in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1236206.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the rating:
Up
Moody's could upgrade the notes if, given our expectations of portfolio
losses, levels of credit enhancement are consistent with higher
ratings. In sequential pay structures, such as the one in
this transaction, credit enhancement grows as a percentage of the
collateral balance as collections pay down senior notes. Prepayments
and interest collections directed toward note principal payments will
accelerate this build of enhancement. Moody's expectation of pool
losses could decline as a result of a lower number of obligor defaults
or appreciation in the value of the equipment securing an obligor's promise
of payment. Portfolio losses also depend greatly on the US macroeconomy,
the equipment markets, and changes in servicing practices.
Down
Moody's could downgrade the notes if, given our expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread
is not sufficient to cover losses in a given month. Moody's expectation
of pool losses could rise as a result of a higher number of obligor defaults
or deterioration in the value of the equipment securing an obligor's promise
of payment. Portfolio losses also depend greatly on the US macroeconomy,
the equipment markets, and poor servicer performance. Other
reasons for worse-than-expected performance include error
on the part of transaction parties, inadequate transaction governance,
and fraud.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Sandie Zhang
Associate Lead Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Benjamin Shih
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
