Moody’s Investors Service assigned provisional ratings to notes to be issued by Daimler Trucks Retail Trust, Series 2018-1, sponsored by Mercedes-Benz Financial Services, a wholly owned subsidiary of Daimler AG, which will also act as servicer and administrator of the transaction.
The notes will be backed by a pool of fixed-rate truck and transportation equipment loans. The receivables are secured by new and used trucking and transportation equipment such as tractors, trailers, buses and vans. This securitization will be MBFS USA’s first term ABS transaction backed by truck and transportation equipment loans.
The complete rating actions are as follows:
Moody’s said the provisional ratings are based on asset characteristics of the securitized pool of loans, structural features, credit enhancement, the performance of MBFS USA’s managed portfolio for the trucking and transportation equipment loans and the experience of MBFS USA as the originator and servicer.
Moody’s noted that although MBFS USA is not rated by Moody’s, the company is an indirect wholly owned subsidiary of Daimler AG. Moody’s views MBFS as an experienced sponsor and servicer. In addition, MBFS USA is a frequent sponsor of securitizations of retail auto receivables, retail auto leases and dealer floorplan receivables, for which it also acts as servicer.
Moody’s median cumulative net loss expectation for the DTRT 2018-1 collateral pool is 1.50% and the Aaa level is 11%. Moody’s based its loss expectation on the credit quality of the underlying collateral and the performance of MBFS USA’s managed portfolio. In the determination of the Aaa level, Moody’s evaluated the variability of that loss estimate based on factors including the securitized pool characteristics including seasoning, structural features, the performance data for the managed portfolio, and the originator and servicer quality.
At closing, the Class A notes will benefit from 10.00% hard credit enhancement. Hard credit enhancement will consist of overcollateralization (9.75% of the cutoff date pool balance) and a fully funded reserve account (0.25% of the cutoff date pool balance), both of which are non-declining, and are therefore expected to increase over time as a percentage of the remaining pool balance. The notes will also benefit from excess spread.
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