RPT-Fitch Expects to Rate GE Equipment Small Ticket, L.L.C., Series 2014-1; Presale Issued
(Repeat for additional subscribers)
March 31 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings expects to rate GE Equipment Small Ticket, L.L.C., Series 2014-1 as follows:
--$240,250,000 class A-1 notes 'F1+sf';
--$195,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$195,000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$42,000,000 class A-4 notes 'AAAsf'; Outlook Stable;
--$16,350,000 class B notes 'AAsf'; Outlook Stable;
--$30,350,000 class C notes 'Asf'; Outlook Stable.
Fitch's stress and rating sensitivity analysis are discussed in the presale report titled 'GE Equipment Small Ticket, L.L.C., Series 2014-1,' dated March 31, 2014, which is available at 'www.fitchratings.com' or by clicking on the link below.
KEY RATING DERIVERS
High Concentration of Office Imaging (OI) Equipment: Approximately 90.06% of series 2014-1 is OI equipment collateral, which is comparable to recent securitizations.
Decrease in OI Business Segment: Approximately 72.85% of the pool is from GECC's OI business segment, compared with 89.32% in 2013-1. Loss performance on the OI portfolio has historically been weaker than that of other OI equipment collateral. As a result, Fitch's base case loss expectation has decreased from the prior transaction.
Increase in Booked Residuals: The residual concentration for 2014-1 is 10.75%, up from 8.10% in 2013-1. Higher residual values (RVs) increase the transaction's exposure to residual realization risk. The increase in RVs is primarily due to the increase in seasoning to 11.5 months from 7.0 months in 2013-1. Improving Asset Performance: GECC's managed static pool data have experienced improved loss performance for more recent vintages. Furthermore, all transactions issued by GECC have experienced cumulative net losses (CNLs) inside of Fitch's initial expectations.
Quality of Origination, Underwriting and Servicing: GECC has demonstrated adequate 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 CE 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.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'GE Equipment Small Ticket, L.L.C., Series 2014-1 - Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated April 17, 2012.
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