Approximately $677 million securities affected.
New York, November 21, 2012 -- Moody's Investors Service has assigned definitive ratings to the notes issued by CNH Equipment Trust 2012-D (CNH 2012-D), sponsored by CNH Capital America LLC (CNH), an affiliate of CNH Global N.V. (Ba2, stable). The transaction is a securitization of U.S. retail installment contracts and loans backed primarily by new and used agricultural equipment.
The complete rating actions are as follows:
Issuer: CNH Equipment Trust 2012-D
$150,000,000 Class A-1 Notes, Definitive Rating Assigned Prime-1 (sf)
$215,000,000 Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
$210,000,000 Class A-3 Notes, Definitive Rating Assigned Aaa (sf)
$86,686,000 Class A-4 Notes, Definitive Rating Assigned Aaa (sf)
$15,231,000 Class B Notes, Definitive Rating Assigned A2 (sf)
Collateral for the transaction, originated by CNH and serviced by affiliate New Holland Credit Company, LLC, consists of retail installment sale contracts and retail installment loans secured by agricultural (93.88%) and construction (6.12%) equipment, both new (54.45%) and used (45.55%). The ratings are based on an analysis of the credit quality of the collateral, the historical performance of similar collateral originated by the sponsor, the servicing ability of New Holland Credit Company, LLC, and the level of credit enhancement available under the proposed capital structure.
Moody's median cumulative net loss expectation is 0.65% and the Volatility Proxy Aaa Level is 6.50% for the CNH 2012-D pool. The expected loss is primarily based on the observed performance for the sponsor's managed portfolio and the performance of prior securitizations that have similar pool characteristics to the CNH 2012-D pool. The expected loss is also based on an analysis of the historical performance of static pools of quarterly originations from the sponsor, stratified along certain key credit metrics. Consideration is also given for the differences between the economic conditions underlying observed historical performance and our expectation of future economic conditions. The 0.65% expected loss for the CNH 2012-D pool is the same as the expected loss of the CNH 2012-C pool, the most recent transaction of CNH that was rated by Moody's. The expected loss for this transaction is again supported by a modest improvement in the expected performance of construction equipment and continued low loss levels in 2010 and 2011 vintage transactions. Our expected loss is at or near cycle lows and, given the lack of material diversity in industry exposure, Aaa Volatility Proxy Levels are unchanged from prior transactions in 2012-B or 2012-C and are also at or near cycle lows. The current drought conditions in the Midwest are not expected to have a material impact on losses for this deal for three main reasons. Crop and revenue insurance for grain producers along with government disaster assistance for livestock producers is expected to fill much of the farmers' cash flow gap due to drought losses. Additionally, farmers with crops are seeing much higher prices. Lastly, farmers, in general, have very strong balance sheets and are in a good position to cope and respond to the drought conditions.
The V Score for this transaction is Low/Medium, which is in line with the score assigned to the U.S. Agricultural and Construction Equipment Loan ABS sector. The V Score indicates "Low/Medium" uncertainty about critical assumptions. Overall, we view the credit risk for this asset class to be relatively straight-forward and well understood given the high granularity of the collateral pools and the long track record of securization over varying economic conditions. The assessment of Low/Medium, as opposed to Low, is primarily driven by the non-homogenous nature of the assets and the varying sensitivity of the obligors to changes in economic conditions, given that the obligors can vary from small and medium businesses to large corporations. Agricultural equipment receivables account for a majority (93.88%) of the collateral securitized in this deal, which is a positive given that the construction equipment receivables have performed significantly worse historically, particularly through the recent economic downturn. Although delinquency levels for agricultural loans increased throughout the economic downturn, they have since fallen to historical lows and, in our view, the fundamentals for the agricultural sector remain sound.
Moody's Parameter Sensitivities: If the net loss used in determining the initial rating were changed to 1.25%, 3.15%, or 4.85%, the initial model-indicated output for the Class A notes might change from Aaa to Aa1, A2, and Baa3, respectively. If the net loss used in determining the initial rating were changed to 0.75%, 1.15%, or 1.75%, the initial model-indicated output for the Class B notes might change from A2 to A3, Baa3, and Ba3, 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.
The principal methodology used in this rating was "Moody's Approach to Rating Securities Backed by Equipment Leases and Loans," published in March 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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. Equipment Lease and Loan ABS Sector" are also available on moodys.com.
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Michael Labuskes Associate Analyst Structured Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Michael McDermitt VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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