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Ford readies $1.26B dealer floorplan securitization

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Ford Motor Credit is placing its second master floorplan securitization this year in a dual-issue transaction totaling $1.26 billion, according to presale reports.

Ford Credit Floorplan Master Owner Trust A, Series 2017-2 and Series 2017-3 follows on the captive lender’s $1.05 billion dealer inventory financing deal in May.

The new transaction consists of two series of notes – the $862.8 million Series 2017-2 and the $402.6 million Series 2017-3. The 2017-2 series includes a $750 million Class A tranche divided between a fixed Class A-1 series and a floating-rate Class A-2 bonds issue – each to be sized according to investor demand.

The deals have preliminary triple-A senior note ratings from Fitch Ratings and S&P Global Ratings. The Class A notes in each series carries 24.38% credit enhancement, which includes 11.5% subordination, 12% of overcollateralization and a 0.88% credit reserve.

The combined collateral for the 2017-2/2017-3 transactions have a principal balance of $20.6 billion, or an average of $6.25 million per dealership. The pool’s composition includes 92.6% in new vehicles, with the bulk of pool’s used cars (5%) financed through the trust’s partnership with used-car store chain AutoNation.

The floorplan receivables from dealers pay down Ford Motor Credit warehouse lines that nearly 3,300 franchised Ford dealers use primarily to finance new Ford and Lincoln vehicles on their lots. The vehicle loans from the trust are paid off with proceeds of the retail sales, or on a prescribed pay-down schedule should the vehicle remain in the dealer’s inventory beyond a certain period of time.

The latest deal pushes the industrywide ABS volume for dealer inventory financing past $8.5 billion, the highest mark since 2014 for the captive-finance arms of Ford, GM Financial, Ally Financial, Nissan Motor Acceptance Corp. and Daimler AG.

Fitch reports that Ford's floorplan trust’s existing deals (which total $11.2 billion in 144A and public-term securitizations) continue to perform well despite slowing sales and rising inventory levels.

The monthly repayment rate of dealers – a gauge into new-car sales performance and how well dealers are churning their inventory – remains stable at approximately 39% (far above the 25% three-month average trigger rate that would require additional credit enhancement on the senior notes.) The monthly average MPR rate average 44.6% in 2015, the last time it exceeded 40%. Ford previously experienced peak post-crisis repayment levels between 44.3% (2009) and 48.1% (2011).

Ford has reduced the levels of vehicles sitting in a dealership more than 120 days to 25.8% from 27.9% a year ago. The percentage unsold past 270 days represents 5.1% of the pool balance, down from 5.8% year ago. Fitch notes that is “in line” with pre-2015 levels and “represents a return to more normalized sales and inventory levels.”

Ford has also increased the number of dealers in its lowest-risk, Group 1 credit tier group; it now comprises 89.8% of the receivables, vs. 85.2% in June 2016.

MPR rates have fallen for some floorplan issuers such as GM and Ally, partly due to a pileup of inventory as sales slowed and dealerships received advanced delivery of vehicles in order to accommodate planned factory downtime in the summer (either for maintenance needs or for plans to convert plants for assembly to different models).

The weighted average spread over the prime rate for dealers in the transaction was 1.32% through June 30, 2017 for the trust.

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