CCG Receivables Trust 2019-1 Notes Assigned Preliminary Ratings


  • CCG Receivables Trust 2019-1's issuance is an ABS transaction backed by midticket equipment loans and leases and associated equipment.
  • We assigned our preliminary ratings to the class A-1, A-2, B, and C notes.
  • The preliminary ratings reflect our view of the transaction's credit support and legal structure, among other factors.
 
NEW YORK (S&P Global Ratings) April 3, 2019--S&P Global Ratings today assigned 
its preliminary ratings to CCG Receivables Trust 2019-1's asset-backed notes 
(see list).

The note issuance is an asset-backed securities transaction backed by 
midticket equipment loans and leases and associated equipment.

The preliminary ratings are based on information as of April 3, 2019. 
Subsequent information may result in the assignment of final ratings that 
differ from the preliminary ratings.

The preliminary ratings reflect: 
  • The availability of approximately 15.9%, 8.6%, and 6.6% credit support (based on stressed break-even cash flow scenarios) for the class A, B, and C notes, respectively. These credit support levels provide coverage, based on multiples in our equipment leasing criteria, of our cumulative net loss range, which is consistent with the preliminary ratings. Our cumulative net loss ranges from 2.45%-3.15% because it reflects our stressed recovery rate range of 60%-80%, with higher recovery rates assumed for lower rating categories.
  • Our expectation that under a moderate ('BBB') stress scenario, all else being equal, our assigned preliminary ratings will remain within one rating category, for the class A and B notes, and within two rating categories, for the class C notes, of the preliminary ratings over the next 12 months, consistent with our credit stability criteria (see " Methodology: Credit Stability Criteria," published on May 3, 2010).
  • Our expectation for the timely payment of periodic interest and principal by the final maturity date according to the transaction documents, based on stressed cash flow modeling scenarios using assumptions consistent with the assigned preliminary ratings. Our stressed cash flow runs assume a 1.0% per year servicing fee (the transaction's servicing fee is 0.75% per year).
  • The pool's obligor diversification. Each individual obligor represents 1.46% or less of the pool, which is below our 1.50% threshold level to be considered an additive factor for obligor concentrations in our stressed loss calculations.
  • The collateral characteristics of the securitized pool of equipment loans and leases, including the segment mix (construction, transportation, waste, and machine tools). Our cumulative net loss range is unchanged and continues to be driven largely by each segment's performance and our stable outlook for demand and credit quality in the transportation and construction industries, the two largest segments in the pool (approximately 80% in total). Machine tools, which has limited data available, increased as a percentage of the pool by about 2%, but this is offset by an increase in waste, historically the best performing (lowest net loss) of Commercial Credit Group Inc.'s (CCG's) segments.
  • CCG's role as servicer of the portfolio and its experience servicing seven prior 144a transactions.
  • Portfolio Financial Servicing Co. (PFSC), the backup servicer, has acted as backup servicer for CCG on multiple credit facilities since 2005 and has significant experience servicing loans and leases backed by equipment similar to that in the series 2019-1 transaction.
  • CCG's high historical recoveries. In our view, the company's recovery rates are significantly higher and less volatile than those we observe for other commercial finance companies. We believe the higher rates are attributed to the relatively high percentage of used equipment in CCG's portfolio, which is hit with less depreciation; management expertise in valuing equipment and remarketing to CCG customers; conservative underwriting; and loan terms that are much shorter than the equipment's remaining useful life. However, we lower the historical recovery rates when determining our net loss range to reflect the potential for lower recovery rates in an industry downturn or if CCG is no longer servicing the portfolio.
  • The transaction's legal structure.
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