CNH Industrial Capital Canada's 3.75% Notes: A Prudent Bet in a Yield-Starved Market

As Canadian investors grapple with historically low interest rates and scarce high-quality fixed-income opportunities, CNH Industrial Capital Canada Ltd.'s recent Cdn$500 million notes offering presents a compelling proposition. The 3.75% senior unsecured notes due June 5, 2029, structured as a private placement for accredited investors, offer a rare blend of yield, credit strength, and strategic alignment with current market conditions. However, the window to secure this opportunity is narrowing—act swiftly before it closes.

The Case for Yield in a Low-Rate Environment

With Canadian government bond yields hovering near record lows and traditional savings accounts offering paltry returns, the 3.75% coupon rate on these notes stands out. For context, the 10-year Government of Canada bond yield currently sits at 2.85%, while the notes' semi-annual payments (due December 5 and June 5) provide a 47-basis-point premium to this benchmark.

This spread widens further when comparing to ultra-safe alternatives like GICs or high-yield savings accounts, which typically yield below 3%. The notes' four-year duration (maturing in 2029) also offers stability for investors seeking a predictable income stream without overextending their risk profile.

Creditworthiness Anchored by Triple Guarantees

The notes are senior unsecured obligations of CNH Industrial Capital Canada Ltd., but their strength is bolstered by guarantees from three key subsidiaries of CNH Industrial N.V., a global leader in agricultural and construction equipment:
- CNH Industrial Capital LLC
- CNH Industrial Capital America LLC
- New Holland Credit Company LLC

The guarantors' credit ratings, as of mid-2025, reflect a moderate investment-grade profile:
- S&P Global: BBB+ (negative outlook)
- Fitch Ratings: BBB+ (negative outlook)
- Moody's: Baa2 (stable outlook)

While the negative outlook from S&P and Fitch signals potential risks tied to economic volatility, the Baa2/BBB+ ratings affirm the guarantors' capacity to meet obligations. Notably, their parent company, CNH Industrial N.V., maintains a robust balance sheet with $14 billion in annual revenue (2024) and exposure to cyclical sectors like agriculture and infrastructure—industries with inherent demand resilience.

Liquidity Risks and Strategic Workarounds

The private placement structure means these notes will trade only among accredited investors post-issuance, limiting secondary market liquidity. This is a critical consideration: investors must be prepared to hold the notes to maturity unless they can find a buyer in a thinly traded market.

However, this drawback is offset by two strategic advantages:
1. Premium Pricing: The notes were issued at par (100% of principal), ensuring no upfront discount.
2. Call Protection: The terms do not mention a call option, reducing the risk of early redemption—a common pitfall in corporate bonds.

For investors with a long-term horizon (3+ years), the trade-off between liquidity constraints and the notes' yield-advantaged profile is rational.

Act Now—The Clock is Ticking

The offering closes on June 5, 2025, leaving a narrow window to participate. Given the limited supply of investment-grade corporate notes in Canada and the attractive yield in a low-rate environment, demand is likely to outstrip availability.

Final Verdict: A Calculated Win

CNH Industrial's notes are not without risks—credit rating downgrades or a sharp economic downturn could pressure the guarantors. Yet, the 3.75% yield, triple guarantees, and alignment with the firm's industrial backbone make this a prudent bet for income-focused investors.

Do not miss this opportunity. With yields at historic lows and high-quality alternatives scarce, securing a 3.75% return with a BBB+/Baa2 credit backing is a rarity. Contact your financial advisor immediately to allocate capital before the June 5 deadline.

Investment decisions should align with individual risk tolerance and financial goals. Past performance does not guarantee future results.