Fitch Rates John Deere Owner Trust 2016

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings to the John Deere Owner Trust 2016 (JDOT 2016) notes:

--$229,000,000 class A-1 'F1+sf';

--$234,000,000 class A-2 'AAAsf'; Outlook Stable;

--$222,000,000 class A-3 'AAAsf'; Outlook Stable;

--$71,000,000 class A-4 'AAAsf'; Outlook Stable;

--$19,481,477 certificates not rated.

Fitch's stress and rating sensitivity analysis are discussed in the presale report titled 'John Deere Owner Trust 2016', dated Feb. 18, 2016, which is available on Fitch's web site. The presale report details how Fitch addresses the key rating drivers summarized below.

KEY RATING DRIVERS

High Concentration of AG Equipment: JDOT 2016 is comprised of approximately 75% AG equipment, consistent with the prior transactions dating back to 2011. While AG equipment historical losses have been low, the high concentration in the pool limits diversification. However, geographic diversity, diversification within the AG sector, and equipment versatility help mitigate the high concentration.

Consistent Collateral Concentrations: The pool contains 75.2% AG and 24.8% CO equipment. These concentrations are consistent with those of JDOT 2015-B. Furthermore, the pool consists of 62.1% annual-pay contracts, which historically have experienced a lower level of losses versus other payment types.

Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for JDOT 2016 is 3.51%, consistent with JDOT 2015-B. The initial reserve in JDOT 2016 is 1.00%, while the subordinated certificates provide 2.51% enhancement. Initial excess spread in JDOT 2016 is expected to be approximately 1.94%, up from 1.78% in JDOT 2015-B. Under Fitch's 'AAAsf' scenario, CE for the class A notes was able to withstand more than 5.0x the expected net loss rate of 1.00%.

Stable Origination, Underwriting, and Servicing: JDCC has demonstrated strong capabilities as originator, underwriter, and servicer, as evidenced by historical delinquency and loss performance of securitized trusts and its managed portfolio. All securitizations issued and rated by Fitch have performed within initial base case expectations.

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.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings to increased losses over the life of the transaction. Fitch's analysis found that the notes display limited sensitivity to increased defaults and losses, showing limited impact on the rating of the notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.

DUE DILIGENCE USAGE

Additionally, Fitch was provided with third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence focused on comparing or recalculating certain information with respect to 120 receivables. Fitch considered this information in its analysis and the findings did not have an impact on our analysis/conclusions. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.

Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Feb. 18, 2016. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in ' John Deere Owner Trust 2016- Appendix'. These R&Ws 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 Jan. 21, 2016.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the link.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating U.S. Equipment Lease and Loan ABS (pub. 03 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874138

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

John Deere Owner Trust 2016 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878003

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000361

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1000361&flm_nm=15e_1000361_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000361

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160302006548/en/

Fitch Ratings
Primary Analyst
Andrew Tinari
Analyst
+1-312-368-3127
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst
Joyce Fargas
Director
+1-212-908-0824
or
Committee Chairperson
Steven Stubbs
Senior Director
+1-212-908-0676
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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