BMW launches first U.S. floorplan ABS offering in three years
BMW Financial Services N.A. is issuing its first securitization of dealer inventory financing in three years, according to rating agency presale reports.
BMW Floorplan Master Owner Trust (FMOT) Series 2018-1 is a $900 million transaction with a single Class A tranche of notes backed by the receivables from floorplan credit lines primarily extended to BMW dealers to finance their inventories of new and used BMW, Rolls-Royce and MINI-branded vehicles.
New vehicles make up 79% of the receivables pool for BMW FMOT 2018-1.
The trust will issue a mix of fixed- and floating-rate notes (based off one-month Libor), all of which benefit from 17.76% credit support and have an expected maturity date of May 2021. The notes carry preliminary triple-A ratings from Fitch Ratings and S&P Global Services.
BMW Financial had not issued bonds from the trust since the 2015-1 series, which carried higher credit enhancement of 18.68%, according to S&P.
Floorplan securitizations are pools of lines of credit that dealers use to finance their inventory. Dealers repay the trust for the full price of a vehicle after selling it to a customer.
BMW Financial has one of the strongest monthly payment rates from its dealer network among U.S. automotive floorplan ABS issuers, with a 2018 monthly average of 48.9%.
The monthly payment rate at which dealers repay trusts is a cornerstone ABS metric for floorplan note performance, providing the percentage of outstanding receivables that dealers pay from floorplan-financed vehicles sold in the retail channel. The trust is usually paid off in full by the dealer after a vehicle is sold, so the rate provides insight into a client dealer’s ability to manage inventory flow.
Because of the BMW trust’s higher average MPR history, the pool has a higher early-amortization trigger on the notes than other issuers. The amortization step-ups kick in if monthly payment rates from BMW dealers fall below an average of 36% during any given three-month period of the deal’s expected three-year life cycle.
That compares to a range of 21%-30% in recent pools of other automotive dealer floorplan issues this year from Ford Motor Credit, GM Financial, Mercedes-Benz Financial Services USA, Nissan Motor Acceptance and Ally Financial.
BMW also has higher exposure to large national dealership groups with above-average concentrations of pooled receivables, including Penske Automotive Group (NYSE: PAG) and Sonic Automotive (NYSE: SAH). And those concentrations are increasing: the BMW FMOT 2018-1 pool is permitted to hold up to 15% of its collateral on receivables from Penske, and 14% from Sonic, an increase from respective 14% and 11% cap limits in BMW’s 2015-1 issuance.
The deal, underwritten by MUFG Securities, is expected to close June 12.