Fitch has published its presale report available to all investors on Fitch's website at 'www.fitchratings.com' or by clicking on the links.
Key Rating Drivers:
Strong Credit Quality and Strong Performance: 2014-A is backed by mostly investment-grade (IG) obligors (50.22% of the pool). Additionally,
Increase in Non-Rated Obligors: The 2014-A transaction has a lower concentration of rated obligors (59%) compared to 2012-A (71%). However, the weighted average rating of 'A-/BBB+' on the rated portion of the pool is consistent with 2012-A. Furthermore, due to the increase in obligors, 2014-A is marginally more diversified in terms of obligor concentrations with the top 20 at 42.24% relative to 43.85% in 2012-A.
Sufficient Enhancement: Initial hard credit enhancement (CE) levels are 17.20%, 11.90%, and 8.90% for the class A, B, and C notes, respectively. Initial excess spread totals approximately 2.49%. The proposed levels are sufficient to support the loss coverage levels consistent with the assigned ratings for all classes.
Quality Underwriting and Servicing Platform: MEF demonstrates capable abilities as an underwriter and servicer, as evidenced by the concentration of investment grade (IG) obligors in 2014-A, as well as the historical loss and residual realization performance of their securitizations and the managed portfolio.
Strong Parent: Fitch rates
Integrity of Legal Structure: The legal structure of the transaction provides that a bankruptcy of MEF would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults or decreases in recovery rates 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 obligor defaults in the portfolio by applying 'CCC' ratings to the largest 100 unrated obligors in the portfolio, stressed down from the 'B' rating applied under the base recommended scenario. Additionally, recoveries were stressed to zero. Fitch's analysis found that the transaction displays some sensitivity to increased obligor defaults and limited sensitivity to the recovery rates.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Macquarie Equipment Funding Trust 2014-A - Appendix'. This R&W is 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
For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance, and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'firstname.lastname@example.org'.
Additional information is available at 'www.fitchratings.com'.
--'Global Structured Finance Rating Criteria' (
--'Global Rating Criteria for Corporate CDOs' (
--'Criteria for Rating U.S. Equipment Lease and Loan ABS' (
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance' (
--'Macquarie Equipment Funding Trust 2014-A' (
--'Macquarie Equipment Funding Trust 2014-A - Appendix' (
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions
Criteria for Rating U.S. Equipment Lease and Loan ABS
Global Rating Criteria for Corporate CDOs
Global Structured Finance Rating Criteria
Source: Fitch Ratings
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