Moody’s Investors Service assigned provisional ratings to $824 million of notes to be issued by DLL 2018-1. The transaction will be the first securitization sponsored by AGCO Finance, a joint venture between De Lage Landen Finance (51% ownership) and AGCO (49% ownership).

AGCO Finance is also the originator of the assets backing the transaction. DLL Finance will be the servicer for this transaction. DLL Finance served as the originator, sponsor and servicer for DLL Securitization Trust 2017-A for $501.5 million that Moody’s rated.

The notes will be backed by a pool of loans and leases secured by new and used agricultural equipment originated by AGCO Finance.

The complete rating actions are as follows:

Issuer: DLL 2018-1, LLC

• Class A-1 Notes, Assigned (P)P-1 (sf)
• Class A-2 Notes, Assigned (P)Aaa (sf)
• Class A-3 Notes, Assigned (P)Aaa (sf)
• Class A-4 Notes, Assigned (P)Aaa (sf)

The ratings of the notes are based on the credit quality of the underlying equipment contracts and the pool’s expected performance, the structural and legal aspects of the transaction and the experience and expertise of AGCO Finance as the originator and DLL Finance as the servicer of the securitized pool. Additionally, we base our (P)P-1 (sf) rating of the Class A-1 notes on the cash flows that we expect the underlying receivables to generate during the collection periods prior to the Class A-1 notes’ legal final maturity date on May 2019.

Moody’s median seasoning-adjusted cumulative net loss expectation for the DLL 2018-1 collateral pool is 0.60% and the loss at a Aaa stress is 9.00% (inclusive of 6.25% credit loss and 2.75% residual value loss).

Moody’s based its cumulative net loss expectation and the loss at a Aaa stress for the DLL 2018-1 transaction on an analysis of the credit quality of the securitized pool; the historical performance of similar collateral, including managed portfolio credit performance and residual values realization of similar equipment; the ability of DLL Finance to perform the servicing functions; and current expectations for the state of the macroeconomic environment and agriculture industry during the life of the transaction.

At closing the Class A notes benefit from 9.55% of hard credit enhancement (as a percentage of the initial pool balance). Hard credit enhancement will consist of initial overcollateralization of 8.05%, with a target of 9.00% of the initial collateral balance and a cash reserve account of 1.50%, with a floor of 1.10% of the initial collateral balance. Excess spread may be available as additional credit protection for the notes. The transaction’s payment structure and the overcollateralization target will result in a rapid build-up of credit enhancement in the transaction.