General Motors is tapping the securitization market to help it provide inventory finance for automotive dealerships.
The $750 million GMF Floorplan Owner Revolving Trust (GFORT), Series 2017-1 will issue five tranches of notes with preliminary ratings from Fitch Ratings:
The senior class A notes will be split into class A-1 fixed-rate notes and A-2 floating-rate, both rated AAA by Fitch; the class B fixed-rate notes are rated AA; the class C fixed-rate notes are rated A, and the class D fixed-rate notes, which are being retained by the sponsor, are rated BBB.
The notes are backed by a revolving pool of dealer floorplan receivables originated from credit lines made by General Motors Financial to retail automotive dealers franchised by General Motors Co. as well as a small portion of other original equipment manufacturers. This is the third DFP ABS transaction issued by GMF and rated by Fitch.
Among the primary ratings considerations for Fitch is the fact that dealer concentration limits are in place, mitigating risks of individual dealer defaults and losses. Concentration limits are also in place to limit exposure to specific vehicle types and segments. As of Sept. 30, 2016, the top dealer in the trust only accounted for 3.1% of the receivables.
Initial credit enhancement for the class A notes is 27.86% of the nominal liquidation account, is consistent with previous deal, completed last year. Other structural features such as early amortization triggers, mitigate risks of manufacturer and dealer defaults and/or bankruptcies.