GM Financial’s next securitization of $414.7 million in dealer floorplan receivables is the fourth this summer from the stable of General Motors’ captive finance partners, according to a presale reports.
GMF Floorplan Owner Revolving Trust (GFORT) Series 2017-3 is the second pooling of dealer payments from primarily GM-franchise dealer financing it has issued this month, following the trust’s upsized $1.35 billion transaction that closed Aug. 15.
GFORT 2017-3 will issue a $350 million senior Class A tranche of floating rate notes supported with 27.86% credit enhancement, which is in line with GMF transactions since early 2016. Moody's Investors Service and Fitch Ratings have issued preliminary AAA ratings. The rest of the capital stack consists of three fixed-rate subordinate classes (Classes B, C, and D) totaling $64.7 billion. All of the notes have a two-year expected maturity, and a four-year legal maturity.
The expected rate on the Class A bonds is Libor plus 35 basis points, which would produce an expected yield of 3.69% based on GMF’s wholesale finance rate charged to dealers (38 basis points under prime, assumed by Fitch at 4.25% for the new notes).
The pool has an 85% concentration of new autos, SUVs and light-duty trucks from the accounts of 764 dealers, who are paying on average principal balances of $8.3 billion for the lines of credit provided to purchase the vehicles. GMF has added about 100 additional dealers into its floorplan program since last year, as it continues to recruit business away from Ally Financial, the former GMAC affiliate of GM that now is part of independent Ally Bank.
This migration shift is not viewed as a credit negative by Fitch “since the new dealers, mostly larger balance dealers, add further diversification to the trust portfolio.” The GFORT dealer breakdown includes 53.66% Chevrolet franchises, 19.36% GMC, 11.22% Buck and 8.31% Cadillac.
GFORT also serves a small contingent of Ford dealers (1.22%) in the latest issue.
The age distribution of unsold vehicles in the pool show slightly more cars are remaining unsold for a longer period of time, but Fitch does not consider it an impactful change. The 2017-3 pool has 73.5% of the autos on dealer lots for less than four months, which is consistent with GMF pools dating back to the trust’s inception in 2013. The unsold cars with receivables outstanding longer than six months is up to 16.1%, from 12.9% at this time last year.
The monthly payment rates by dealers – considered an indicator of sales and dealer inventory management – continue to decline for the trust. Through June, the MPR averaged 34.3%, compared to 41.5% in 2016, 40% in 2015 and 35.9% in 2014. The decline is due to “slower inventory turnover levels as measured by days of supply, as auto sales have slowed this year and inventories have grown.”
GM’s monthly sales in July were down 15.5% from July 2016, and year-to-date sales through July were down 3.9%.
Because of the inclusion of so many new dealers, GMF’s risk rating distribution of its dealer credit metrics has taken on some deterioration. Whereas 24.3% of dealers in GFORT’s managed portfolio were in the highest Class A tier of dealers with the lowest risk factors at this time last year, that has shrunk to 20.6% while the Class B tier narrowed from 45.6% of the portfolio to 39.4%.
The available credit lines for dealers varies between $9.4 million to $81.6 million, according to Fitch’s report.
Those in the riskier Class C and D categories of dealers at higher risk of default in monthly installment payments on inventory now comprise 37.9% of the portfolio, up from 30.1% in June 0216.
The GFORT managed portfolio has $6.31 billion in outstanding receivables.
Ally Financial still provides floorplan financing to more than 1,700 GM and Fiat Chrysler dealers, and itself has issued $750 million in transactions from its Ally Master Owner Trust vehicle in two separate transactions in June.
Ally and GMF have now issued a combined $3.8 billion in floorplan securitizations this year, after a nearly dormant 2016 when GMF released a lone $961 million GFORT transaction.
The arrangers for GFORT 2017-3 are Barclays, JPMorgan, Lloyds and RBS Securities.