RPT-Fitch to Rate GE Equipment Transportation LLC 2013-2; Issues Presale
Oct 21 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings and Rating Outlooks to GE Equipment Transportation LLC, series 2013-2 as detailed below.
--$170,000,000 class A-1 notes 'F1+sf';
--$224,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$196,000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$106,500,000 class A-4 notes 'AAAsf'; Outlook Stable;
--$25,000,000 class B notes 'AAsf'; Outlook Stable;
--$25,076,000 class C notes 'Asf'; Outlook Stable.
Key Rating Drivers:
Nondiversified Portfolio: The 2013-2 pool consists of 100% transportation equipment. The significantly high concentration of transportation collateral in the pool reduces equipment and industry diversification, exposing the trust to other factors, which could result in systemic risk.
Weaker Collateral: The concentration of small fleet collateral has increased to 77.91% from 59.07% in 2013-1. This collateral has historically experienced higher losses than the large/medium fleet collateral.
Improved Managed Portfolio Performance: GECC's managed transportation portfolio and securitizations exhibited volatility and asset deterioration from 2007-2009; however, delinquency and loss performance in showed improvement in 2010-2012.
Sufficient Credit Enhancement: Hard credit enhancement (CE) on the notes consists of subordination, overcollateralization (OC) and a cash reserve account. Initial hard CE for the class A, B and C notes is 10.59%, 7.33% and 4.07%, respectively. Additionally, the notes benefit from excess spread, expected to be 3.65% per annum.
Stable Origination, Underwriting and Servicing Platform: GECC has demonstrated sufficient abilities as originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and the 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 could produce loss levels higher than the current projected base case loss proxy and impact available loss coverage and multiples levels. Lower loss coverage could impact ratings and rating outlooks, depending on the extent of the decline in coverage. In Fitch's initial review of the transaction, the notes were found to have some sensitivity to a 1.5x and 2.5x increase of Fitch's base case loss expectation. Under 1.5x base case loss scenario, the notes could be potentially downgraded by one or two rating categories. While under 2.5x base case loss scenario, the notes could be potentially downgraded by two or more rating categories.
Key Rating Drivers and rating sensitivities are further detailed in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the below link.
Link to Fitch Ratings' Report: GE Equipment Transportation LLC, Series 2013-2 (US ABS)
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