New York, April 13, 2022 — Moody’s Investors Service (“Moody’s”) has assigned definitive ratings of P-1 (sf) to the Class A-1 notes and Aaa (sf) to the Class A-2, Class A-3 and Class A-4 notes (collectively, the notes) issued by MMAF Equipment Finance LLC 2022-A (MMAF 2022-A or the issuer). The sponsor and servicer is MassMutual Asset Finance LLC (MMAF), a wholly-owned subsidiary of Massachusetts Mutual Life Insurance Company (Aa3 stable).
The notes are backed by fixed-rate equipment loans and leases, which are secured by transportation equipment, telecommunications equipment, energy management equipment, and other types of equipment. The obligors under the contracts are mostly mid to large size corporates of high credit quality.
The complete rating actions are as follows:
Issuer: MMAF Equipment Finance LLC 2022-A
Class A-1 Notes, Definitive Rating Assigned P-1 (sf)
Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
Class A-3 Notes, Definitive Rating Assigned Aaa (sf)
Class A-4 Notes, Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The ratings are based on an assessment of the credit quality of the underlying collateral, structural features, the historical performance of the managed portfolio and MMAF’s prior securitizations of similar collateral, the experience and expertise of MMAF as the originator and servicer, and the legal aspects of the transaction. Additionally, we base our 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 3, 2023.
At closing, the notes benefit from hard credit enhancement equal to 10.75% of the initial pool balance, consisting of a non-declining cash reserve account of 0.50% and overcollateralization of 10.25%. Excess spread may be available as additional credit protection for the notes. The transaction has a full-turbo structure. Credit enhancement for the notes will increase over time because all excess spread will be used to pay down the notes, thereby increasing over-collateralization.
MMAF, as the sponsor and servicer, has engaged Vervent, Inc. as the sub-servicer.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was “Equipment Lease and Loan Securitizations Methodology” published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1243607. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Moody’s could downgrade the ratings if levels of credit protection are insufficient to protect investors against current expectations of loss. Moody’s updated expectations of loss may be worse than its original expectations because of higher frequency of default by the underlying obligors of the loans and leases, or a greater than expected deterioration in the value of the equipment that secure the obligors’ promise of payment. As the primary drivers of credit performance, negative changes in the US macro economy and the performance of various sectors in which the obligors operate could also affect the ratings.
Additionally, Moody’s could downgrade the short-term rating of the Class A-1 notes if there is a significant slowdown in principal collections in the first year of the transaction, which could result from, among other reasons, high delinquencies or a servicer disruption that impacts obligors’ payments.
Additional research including a pre-sale report for this transaction is available at www.moodys.com.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1325091.
In rating this transaction, Moody’s CDOROM™ is used to model the expected loss for each tranche. Moody’s CDOROM™ is a Monte Carlo simulation tool which takes each underlying asset default probability as input. Each underlying asset default behavior is then modeled individually with a standard multi-factor model incorporating both intra- and inter-industry correlation. The correlation structure is based on a Gaussian copula. Each Monte Carlo scenario simulates defaults and if applicable, recovery rates, to derive losses on a portfolio. For a synthetic transaction, the model then allocates losses to the tranches in reverse order of priority to derive the loss on the tranches. By repeating this process and averaging over the number of simulations, Moody’s can derive the expected loss on the tranches. For a cash transaction, the portfolio loss, or default, distribution produced by Moody’s CDOROM™ may be input into a separate cash flow model in accordance with its priority of payment to determine each tranche’s expected loss.
Moody’s quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Chloe Zhang
Asst Vice President – Analyst
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Aron Bergman
Vice President – Senior Analyst
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
