Fitch Expects to Rate to GE Equipment Transportation 2015-1; Presale Issued
--\$112,500,000 class A-1 notes 'F1+sf';
--\$170,600,000 class A-2 notes 'AAAsf;' Outlook Stable;
--\$152,9000,000 class A-3 notes 'AAAsf'; Outlook Stable;
--\$110,100,000 class A-4 notes 'AAAsf;' Outlook Stable;
--\$ 9,550,000 class B notes 'AAsf'; Outlook Stable;
--\$ 8,350,000 class C notes 'Asf'; Outlook Stable.
Fitch has published its presale report available to all investors on Fitch's website at 'www.fitchratings.com'.
KEY RATING DRIVERS
Consistent Portfolio: 2015-1 is the seventh transaction issued by GEET that is backed only by transportation paper to small-fleet (67.78%) and medium/large-fleet (32.22%) obligors. While 2015-1 has a higher concentration of the weaker-performing small-fleet collateral than 2014-1, exposures are comparable to prior GEET transactions. The significantly high concentration of transportation collateral in the pool reduces equipment and industry diversification.
Improved Managed Portfolio Performance: GECC's managed transportation portfolio and securitizations exhibited volatility and asset deterioration from 2007-2009 but demonstrated marked improvement in originations from 2010-2012.
Strong Securitization Performance: The prior securitized transportation collateral has performed well within initial expectations, with consistent performance across the transactions.
Sufficient Credit Enhancement: Hard credit enhancement (CE) on the notes is 6.63%, 4.97% and 3.52%, respectively. Additionally, the notes benefit from excess spread, which is expected to be 3.45% per annum. The structure supports Fitch's base case proxy of 2.40% for all expected ratings, despite the decline in CE.
Stable Origination, Underwriting and Servicing: GECC has demonstrated sufficient 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 GECC would not impair the timeliness of payments on the securities.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults and loss severity could produce loss levels higher than the current projected base case loss proxy and impact available loss coverage and multiples levels. Lower loss coverage could impact ratings and rating outlooks, depending on the extent of the decline in coverage. In Fitch's initial review of the transaction, the notes were found to have some sensitivity to a 1.5x and 2.5x increase of Fitch's base case loss expectation. Under 1.5x base case loss scenario, the notes show limited sensitivity to this stress and may result in limited downgrades. However, under 2.5x base case loss scenario, the notes could be potentially downgraded by two or more rating categories.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'GE Equipment Transportation 2015-1 - 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 Oct. 31, 2014.
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