by Fitch Ratings on Tuesday, February 18, 2014
CHICAGO — Fitch Ratings expects to assign the following ratings to the GreatAmerica Leasing Receivables Funding, L.L.C., Series 2014-1 notes:
--$102,073,000 class A-1 'F1+sf';
--$96,169,000 class A-2 'AAAsf'; Outlook Stable;
--$119,271,000 class A-3 'AAAsf'; Outlook Stable;
--$73,260,000 class A-4 'AAAsf'; Outlook Stable;
--$16,081,000 class B 'AAsf'; Outlook Stable;
--$13,401,000 class C 'Asf'; Outlook Stable.
Fitch's stress and rating sensitivity analysis are discussed in the presale report titled 'GreatAmerica Leasing Receivables Funding, L.L.C., Series 2014-1', dated Feb. 18, 2014, 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 Copiers/Printers: 69.5% of series 2014-1 consists of copiers/printers. This concentration is consistent with but slightly down from the prior three transactions, which included 71%?76% of this collateral type. Despite the high concentration, copiers/printers have historically performed better than other equipment types within GreatAmerica's portfolio.
Improving Asset Performance: GreatAmerica's managed static pool data have experienced improved loss performance for more recent vintages of the managed portfolio. Furthermore, all transactions issued by GreatAmerica have experienced cumulative net losses (CNLs) inside of Fitch's initial expectations.
Sufficient Credit Enhancement: All classes benefit from a cash reserve account and overcollateralization (OC). In total, initial hard credit enhancement (CE) for the class A, B, and C notes is 13.35%, 9.75%, and 6.75%, respectively. These levels are down slightly from 2013-1. Additionally, all classes benefit from 5.80% in booked residuals.
Quality of Origination, Underwriting, and Servicing: GreatAmerica 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 GreatAmerica 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.
A similar negative impact on loss coverage can also be expected from a lower than expected residual realization rate on the leases. Hence, Fitch conducts a sensitivity analysis by eliminating any residual realizations benefit 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 the residual realizations benefit, while assuming the base case loss proxy, represents a moderate stress. Eliminating residual realizations and a 1.5x increase of the base case CNL represent a severe stress. These stresses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.
During the sensitivity analysis, Fitch examines the magnitude of the multiplier compression by projecting the expected cash flows and loss coverage levels over the life of the notes under higher credit loss and different RV assumptions than those of the initial base case. Fitch models the cash flows with the revised CNL estimates while holding constant all other modeling assumptions, such as prepayment speeds, recovery lags, recovery rates, and loss timing curves. This analysis yields loss coverage levels and multipliers in six-month intervals under the stress scenarios.
Key Rating Drivers and Rating Sensitivities are further described in the presale report dated Feb 18, 2014. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in ' GreatAmerica Leasing Receivables Funding, L.L.C., Series 2014-1 - 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 April 17, 2012.
Additional information is available at www.fitchratings.com.