RPT-Fitch expects to rate GE Equipment Midticket LLC, Series 2013-1
Sept 16 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings expects to rate GE Equipment Midticket LLC, Series 2013-1 as detailed below:
--$120,900,000 class A-1 notes 'F1+sf';
--$132,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$132,000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$54,800,000 class A-4 notes 'AAAsf'; Outlook Stable;
--$7,150,000 class B notes 'AAsf'; Outlook Stable.
Key Rating Drivers:
Shifting Collateral Characteristics: The 2013-1 collateral composition has changed compared to 2012-1. While the concentration of better performing Core receivables has increased, offsetting the increase of Core collateral is an increase in the worst performing Vendor Financial Services (VFS) receivables and the exclusion of strong performing NACCO receivables. Despite the shift in collateral, Fitch expects the 2013-1 to perform comparable to 2012-1.
Sufficient Credit Enhancement: The initial hard credit enhancement (CE) for 2013-1 is up relative to 2012-1 and the proposed levels are sufficient to support the default of the Top 20 and 17 obligors, consistent with the expected ratings of 'AAAsf' and 'AAsf'. Additionally, while not the primary driver the structure is able to support loss multiples consistent with 'AAAsf' and 'AAsf' ratings.
Quality Origination, Underwriting, and Servicing Platform: GECC has demonstrated capable 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.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce CNL levels higher than the base case and would likely result in declines of CE and remaining loss coverage levels available to the notes. Decreased credit enhancement may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
The similar negative impact on loss coverage can also be expected from a lower than expected residual realization rate on the leases. Hence, Fitch conducts sensitivity analysis by eliminating any residual realization benefits and stressing a transaction's initial base case CNL assumption by 1.5x, as well as examining the rating implications on all classes of issued notes. The elimination of residual realization benefits and the 1.5x increase of the base case CNL represent moderate and severe stresses, respectively, and are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.