DBRS Morningstar Finalizes Provisional Ratings for CCG Receivables Trust 2020-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings for the following classes of notes (the Notes) issued by CCG Receivables Trust 2020-1:

-- $72,400,000 Class A-1 Notes at R-1 (high) (sf)
-- $213,083,000 Class A-2 Notes at AAA (sf)
-- $17,297,000 Class B Notes at AA (sf)
-- $15,786,000 Class C Notes at A (sf)
-- $8,396,000 Class D Notes at BBB (sf)

This issuance represents the 12th term asset-backed securitization sponsored by Commercial Credit Group Inc. (CCG) and the ninth rated by DBRS Morningstar, which is secured by the larger small-ticket equipment loan and lease contracts, a security interest in the related equipment and related accounts, insurance proceeds, and other related assets. The Notes were issued under Rule 144A.

The final ratings are based on DBRS Morningstar’s review of the following analytical considerations:

-- The respective coverage multiples of the expected cumulative net loss (CNL), adjusted for the effect of Coronavirus Disease (COVID-19), which are afforded to each class of Notes by the available credit enhancement.
-- The transaction's assumptions consider DBRS Morningstar's set of macroeconomic scenarios for select economies related to the coronavirus outbreak, available it is commentary “Global Macroeconomic Scenarios: July Update,” published on July 22, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 2020, and are reflected in DBRS Morningstar's rating analysis.
-- DBRS Morningstar adjusted its expected CNL assumption for the transaction in consideration of its moderate scenario outlined in the commentary. The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020. This moderate scenario primarily considers two economic measures: declining GDP growth and increased unemployment levels for the year. DBRS Morningstar is using the moderate and the adverse scenarios in the context of its rating analysis with the moderate scenario serving as the primary anchor for current ratings. For commercial asset classes, the GDP growth rate is intended to provide the basis for measurement of performance expectations.
-- The sequential amortization of the Notes, subordination, the nondeclining replenishable reserve account, and the overcollateralization floor are expected to create credit enhancement for the Notes that increases over time.
-- The historical performance of the assets originated by CCG with respect to recoveries and net losses has been consistent.
-- The expected collateral pool is granular. The collateral composition is similar to that included in CCG’s previous term securitizations, all of which have performed well within DBRS Morningstar’s expectations.
-- CCG’s management team has considerable experience and expertise in the equipment leasing industry and continues to maintain a strong competitive position by focusing on financing essential income-producing commercial equipment to small and medium-size businesses.
-- The presence of Vervent Inc., an experienced servicer of equipment-backed collateral, as the Back-up Servicer for this transaction.
-- A satisfactory review of the legal structure and presence of legal opinions that address true sale and nonconsolidation of the assets, which are held by the special-purpose vehicle; a valid first-priority security interest of the Indenture Trustee, U.S. Bank National Association (rated AA (high) with a Negative trend by DBRS Morningstar) in the assets; and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Equipment Lease and Loan Securitizations (July 7, 2020) which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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