CNH Equipment set to raise $835.6 million

A collateral pool heavily focused on agricultural equipment will secure CNH Equipment 2022-B, a transaction that is expected to raise $835.6 million in asset-backed securities.

Farm equipment — a low-loss asset class, historically — makes up 87% of the pool, with construction accounting for the remaining 13%, according to Fitch Ratings. Despite the farm equipment track record, the heavy concentration limits diversification in the deal, Fitch said.

BofA Securities is the lead underwriter of the agreement, with New Holland Credit Co. acting as servicer. The transaction will reimburse noteholders on a sequential basis. Class A tickets, which range from A-1 to A-4, will receive 100% of the principal amount until fully refunded.

Class B tickets will start receiving principal after all four Class A tickets have received full payments. In the event of default and acceleration of the Notes, however, principal payments will be made first to the Class A-1 Notes and then prorated to the remainder of the A Notes.

Fitch noted that 15,065 contracts underpin the new and used equipment warranty pool.

On a weighted average (WA) basis, the contracts have an APR of 3.34% and a remaining term of 55.7 months. The contracts are for six months, the rating agency said.

Although Fitch has expressed concern about the strong representation of agricultural equipment, CNH Equipment is diversified in several other ways. The largest debtor, for example, represents 0.84% ​​of the pool, and the top debtor, 6.18%. Geographically speaking, Illinois represents 7.66% of the transaction. The other four states – Texas, Indiana, Minnesota and South Dakota – represent 6.9%, 5.1%, 5.0% and 4.5% respectively.

Fitch says the ratings have sufficient credit enhancement, with a level of 4.5% on class A-1 to A-4 and 2.25% on class B notes. The ratings range from F1 on grades A-1; ‘AAA’ on notes A-2 to A-4; and ‘A+’ on class B grades.

Michael J. Birnbaum