Fitch Ratings expects to assign the following ratings and rating outlooks to the Navitas Equipment Receivables, Series 2016-1 notes:

• $60,100,000 class A-1 asset-backed notes ‘NRsf’;
• $108,138,000 class A-2 asset-backed notes ‘Asf’; Outlook Stable;
• $25,214,000 class B asset-backed notes ‘BBBsf’; Outlook Stable;
• $6,251,000 class C asset-backed notes ‘BB+sf’; Outlook Stable;
• $3,178,000 class D asset-backed notes ‘B+sf’; Outlook Stable.

Fitch said the ratings for 2016-1 are capped at ‘Asf’ given that this is the first Navitas ABS transaction rated by Fitch, a relatively limited operating history of managed portfolio performance through a full economic cycle, and no paid in full (PIF) ABS transactions.

Diversified Equipment Types: Equipment types are highly diversified within 2016-1, with the highest concentration being titled equipment (primarily trucks) at 13.98%. The next two largest concentrations are Industrial and Medical Laser at 8.60% and 6.39%, respectively. This diversification is consistent with Navitas’ managed portfolio.

Prefunding Account: The 2016-1 transaction includes a prefunding account sized to 20% of the total collateral balance. As this introduces uncertainty regarding the final makeup of the collateral pool, a prefunding stress was incorporated into Fitch’s CGD proxy derivation.

Improving but Limited Asset Performance: Despite limited performance data, Navitas’ managed static performance has improved in recent years. As such, Fitch reflected the use of proxy data from comparable small-ticket equipment originators in the derivation of its CGD proxy, which is 3.60% after incorporating the prefunding stress mentioned above.

Sufficient Credit Enhancement: All classes benefit from a cash reserve account and overcollateralization (OC). Total initial hard credit enhancement (CE) is 21.85%, 9.95%, 7.00% and 5.50% for the class A, B, C and D notes, respectively.

Quality of Origination, Underwriting and Servicing: Navitas 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 Navitas would not impair the timeliness of payments on the securities.