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.

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